Earnings Previews: Analog Devices, ZIM Shipping

All three major U.S. equity indexes posted solid gains Friday: the Nasdaq Composite added 3.8%, the S&P 500 added 2.4% and the Dow rose 1.5%. Investors gave the impression that the market was oversold, following Thursday’s blood bath. The two-year Treasury note added eight basis points and the 10-year added 12 in a mostly losing effort to attract buyers.

Later this week, we shall get the U.S. Census Bureau’s report on retail sales in April (Tuesday), followed by the report on housing starts (Wednesday), and existing home sales and new claims for unemployment benefits (Thursday).

We already have previewed Sea Limited, Shoals Technologies and Take-Two Interactive, along with Home Depot, JD.com, Macy’s and Walmart, all reporting Monday or Tuesday.

Here is a look at two companies due to report results before markets open on Wednesday.

Analog Devices

Analog Devices Inc. (NASDAQ: ADI) makes a wide range of analog, mixed-signal and digital signal processing chips. The company’s share price has risen by about 10.6% over the past 12 months, including a drop of more than 50% since its 52-week high put up in late November.

Last year’s $20 billion acquisition of Maxim led to record revenue in the company’s first quarter, ended in January. CEO Vincent Roche said at that time that he was “confident” that the company would “sustain this level of performance throughout 2022.” The company’s investor day presentation in early April set a target of 7% to 10% annual revenue growth, a gross margin floor of 70%, a free cash flow margin of 34% to 40%, and a free cash flow return for investors of 100%.

Of 26 analysts covering the stock, 16 have Buy or Strong Buy ratings, and the rest rate the shares at Hold. At a recent price of about $158.75 a share, the stock’s upside potential based on a median price target of $203.20 is about 28%. At the high target price of $225.00, the upside potential is about 41.7%.

For ADI’s fiscal second quarter ended in April, analysts are forecasting revenue of $2.84 billion, up about 5.9% sequentially and 71.8% higher year over year. Adjusted earnings per share (EPS) are forecast at $2.11 for the quarter, up 9% sequentially and 37% higher year over year. For the 2022 fiscal year, the forecasts call for EPS of $8.44, up 30.6%, and revenue of $11.33 billion, up 54.8%.

The stock trades at 18.8 times expected 2022 EPS, 17.2 times estimated 2023 earnings of $9.21 and 16.4 times estimated 2024 earnings of $9.69 per share. The stock’s 52-week range is $143.81 to $191.95, and ADI pays an annual dividend of $3.04 (yield of 1.92%). Total shareholder return for the past year is 10.1%.

ZIM Shipping

Shares of Zim Integrated Shipping Inc. (NYSE: ZIM) have added about 138% over the past 12 months. The Israel-based company provides container shipping internationally, as well as in Israel, and has seen a surge in demand and pricing since coming public in January of 2021.

When the company reported quarterly results in March, shares had risen by 300% since the firm’s initial public offering. Global shipping weight has dropped 13% year over year but rates are up 18%. Except for shipments originating in the Middle East and South Asia, rates are down and shipping weight is down across the board. Zim’s otherworldly dividend yield is the big attraction for investors.

Of eight brokerages covering the company, four have Buy ratings, two have rated the shares at Hold and the other has a Strong Sell rating. At a share price of around $63.65, the upside potential based on a median price target of $80.00 is 25.7%. At the high target of $120.00, the upside potential is 88.5%.

For the company’s first quarter of fiscal 2022, the consensus revenue estimate is $3.39 billion, up by 0.7% sequentially and up by 100% year over year. Adjusted EPS are forecast at $12.73, 10.1% sequentially, and up 146% year over year. For the full fiscal year, current estimates call for EPS of $36.69, down 6%, on sales of $11.93 billion, up by 11.2%.

Zim stock trades at 1.7 times expected 2022 EPS, 5.0 times estimated 2023 earnings of $12.84 and 10.8 times estimated 2024 earnings of $5.88 per share. The stock’s 52-week range is $33.71 to $91.23. The company pays an annual dividend of $19.50 (yield of 30.6%). Total shareholder return for the past year was 146.6%.

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