Analog Devices (NASDAQ:ADI) is scheduled to announce its Q2 FY’25 (April 2025) earnings on Thursday, May 22. The consensus estimates revenues of $2.51 billion for the quarter, reflecting a 16% increase year-over-year, while earnings are anticipated to be approximately $1.70 per share, up from $1.40 in the same period last year. The semiconductor cycle seems to be recovering, and Analog may experience increased demand from the industrial and automotive sectors, alongside a higher demand from data centers. Gross margins could also see improvement due to better volumes and alleviated inventory concerns.
The company currently has a market capitalization of $113 billion. Revenue for the past twelve months stood at $9.3 billion, and it was operationally profitable with $2.0 billion in operating profits and net income of $1.6 billion. However, if you’re looking for upside potential with lower volatility than individual stocks, the Trefis High Quality portfolio offers an alternative, having outperformed the S&P 500 and generated returns over 91% since its inception.
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Analog Devices’ Historical Odds Of Positive Post-Earnings Return
Here are some insights on one-day (1D) post-earnings returns:
- There have been 19 earnings data points recorded over the last five years, with 10 positive and 9 negative one-day (1D) returns noted. Overall, positive 1D returns occurred approximately 53% of the time.
- Interestingly, this percentage rises to 64% when we analyze data from the last 3 years rather than 5.
- The median of the 10 positive returns is 5.4%, and the median of the 9 negative returns is -1.6%.
Additional statistics for observed 5-Day (5D) and 21-Day (21D) returns following earnings are summarized in the table below.
This indicates that the stock has a slightly higher likelihood of a positive move after earnings. Nonetheless, stocks can decline significantly – 20%, 30%, even 50% –as demonstrated during previous market shocks. No stock is exempt. How low can ADI stock drop in a market crash? It’s important to stay updated.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky approach (though it may not be beneficial if the correlation is weak) is to analyze the correlation between short-term and medium-term returns following earnings, identify a pair that demonstrates the highest correlation, and carry out the corresponding trade. For instance, if 1D and 5D exhibit the highest correlation, a trader could take a “long” position for the next 5 days if the 1D post-earnings return is positive. Here is some correlation data drawn from both a 5-year and a 3-year (more recent) timeframe. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and the subsequent 5D returns.
Is There Any Correlation With Peer Earnings?
At times, the performance of peers can impact the stock’s reaction after earnings. Indeed, the pricing may commence ahead of the earnings announcement. Below is some historical data on the past post-earnings performance of Analog Devices stock compared to the performance of peers that reported earnings just prior to Analog Devices. For a fair comparison, peer stock returns also represent post-earnings one-day (1D) returns.
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