Will Analog Devices (ADI) Beat Estimates In Q3 Earnings?

Analog Devices, Inc., (NASDAQ:ADI) , one of the world leaders in the design, manufacture and marketing of high-performance analog, mixed-signal and digital signal processing integrated circuits, is expected to beat expectations when it reports third quarter fiscal 2016 results on Aug 17.

Why a Likely Positive Surprise?

Our proven model shows that Analog Devices is likely to beat estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Analog Devices has the right combination of the two key components.

Zacks ESP: Analog Devices currently has an Earnings ESP of +2.63%. This is because the Most Accurate estimate stands at 78 cents, while the Zacks Consensus Estimate is pegged lower at 76 cents.

Zacks Rank: It currently carries a Zacks Rank #3, which when combined with an ESP of +2.63% make us reasonably confident of a positive surprise.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

What is Driving the Better-Than-Expected Results?

Analog Devices is investing heavily in the health sector and working with several of the world's leading research institutions and system OEMs to improve performance, impact and affordability of medical electronics devices. The focus areas within this segment include care-imaging applications and clinical-grade vital signs monitoring.

In 2015, the company successfully incorporated Hittite and expanded the available opportunities. It expects to deliver strong revenue synergies starting 2017.

While its investments are aimed at strengthening the product line and countering increasing competition, the policy of returning cash through dividends and share buybacks will ensure investor loyalty.

Analog Devices will acquire Linear Technology (NASDAQ:LLTC) in a cash and stock deal worth $14.8 billion. The acquisition will make Analog Devices an industry leader across a huge range of products, customer breadth and scale. The deal will help it to grow significantly in industrial, automotive, and communications infrastructure markets.

The transaction is anticipated to be immediately accretive to the company’s bottom-line results. In addition, the company expects annualized cost synergies of $150 million within the first 18 months post transaction completion.

ANALOG DEVICES Price and EPS Surprise

ANALOG DEVICES Price and EPS Surprise | ANALOG DEVICES Quote

Other Stocks to Consider

Here are some other stocks, which you may want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Carbonite, Inc. (NASDAQ:CARB) , with an Earnings ESP of +50.00% and a Zacks Rank #1.

Stoneridge Inc. (NYSE:SRI) , with an Earnings ESP of +5.71% and a Zacks Rank #1.

Cognex Corporation (NASDAQ:CGNX) , with an Earnings ESP of +2.17% and a Zacks Rank #1.