Can Analog Devices Win Big From AT&T and Sprint?

Analog Devices (NASDAQ: ADI  ) will release its quarterly report on Tuesday, and enthusiastic investors have sent the stock to levels it hasn't seen in over a decade. After dealing with soft markets lately, Analog Devices hopes that telecom players AT&T (NYSE: T  ) and Sprint (NYSE: S  ) will ramp up their spending on building out their LTE network infrastructure and boost the amount of business Analog Devices does in the segment.

Analog Devices makes semiconductor chips for a wide variety of different industries, ranging from general industrial use to automotive and other consumer markets, as well as the communications arena. With the generally sluggish conditions in telecom infrastructure spending, though, Analog has had to tread water from a growth standpoint for a while. Now, the company hopes that good times are here again. Let's take an early look at what's been happening with Analog Devices over the past quarter and what we're likely to see in its report.

Stats on Analog Devices

Analyst EPS Estimate

$0.58

Change From Year-Ago EPS

0%

Revenue Estimate

$688.46 million

Change From Year-Ago Revenue

(0.9%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Can Analog Devices finally grow earnings this quarter?
In recent months, analysts have made only the tiniest of adjustments to their views on Analog Devices earnings, cutting fiscal 2014 estimates by $0.01 per share. The stock has climbed 6% since late August.

Analog Devices delivered mixed results in its previous quarter's results. The chipmaker saw revenue decline by just over 1%, although net income rose 4% thanks to the success of cost-cutting measures that held expenses down. Although CEO Vincent Roche pointed to stronger capital investment from communications and industrial infrastructure spending, the company's guidance tended toward the weaker end of what investors had expected to see.

But Analog's relative strength in its communications infrastructure division points to potential growth in the future. In the U.S., AT&T has worked hard to build out its 4G LTE network in order to match rival Verizon's level of coverage and keep its position as the primary challenger to Verizon's leadership in the industry. Meanwhile, Sprint, having acquired additional funding, will also work on boosting its LTE presence and becoming a bigger player in the U.S. wireless industry. China is also a big growth driver, with activity in both 3G and 4G networks helping to drive demand for infrastructure support as well.

Analog Devices also made a substantial strategic move, choosing to sell its microphone-products business to InvenSense for $100 million upfront plus the potential for further earn-out payments as well. Most analysts focused on the impact the move will have on InvenSense and its existing line of related audio products, but Analog Devices should be able to redeploy the cash effectively to bolster its own growth.

In the Analog Devices earnings report, watch for updates on how telecom infrastructure spending is ramping up. With so much depending on AT&T, Sprint, and other telecom players stepping up to the plate, Analog Devices really needs to see growth climb in order to make the most of the opportunity that a telecom recovery could bring.

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