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Analog Devices likely to post weak Q3 earnings

Analog Devices (NASDAQ: ADI) is set to release its third-quarter earnings results on Wednesday before the market opens. The chipmaker’s results will be hurt by the discontinue of the products shipments as well as the restructuring of certain manufacturing facilities. The bottom line will hurt by higher costs and expenses due to an increase in research and development expenses.

The company’s customers are likely to delay their existing and future orders due to the postponement of spending by consumers and businesses. This was due to the continuing uncertainty surrounding the stability of global credit and financial markets. The significant disruption to markets could adversely impact the company’s ability to access external financing sources.

The company’s future success significantly depends on its continued ability to execute business strategy, improve existing products and develop new products while entering new markets. The new products design remained a costly process for Analog Devices as it involves significant investment in research and development with no assurance of return.

Analog Devices likely to post weak Q3 earnings
Photo Courtesy: Analog Devices / Facebook post

In addition, the company could require additional investment for establishing itself in the developing markets such as Industry 4.0, autonomous driving, artificial intelligence, and 5G. Analog Devices faces intense competition in the semiconductor industry and expects this competition to increase in the future, including companies located outside the US.

Analysts expect the company’s earnings to decrease by 20.30% to $1.22 per share and revenue to decline by 7.70% to $1.45 billion for the third quarter. In comparison, during the previous year quarter, Analog Devices posted a profit of $1.53 per share on revenue of $1.57 billion. The company has surprised investors by beating analysts’ expectations in all of the past four quarters.

Also read: Estée Lauder Q4 earnings review

For the second quarter, Analog Devices reported an 8% drop in earnings due to a 2% decline in revenue hurt by the volatile and uncertain market. However, the company saw strong growth in its communication applications across multiple markets. For the long-term, the company remained well-positioned to continue to deliver sustainable profitable growth and strong shareholder returns.

For the third quarter, the company expects revenue in the range of $1.40 billion to $1.50 billion and earnings in the range of $0.79 to $0.93 per share. Adjusted earnings are anticipated to be in the range of $1.15 to $1.29 per share. The forecast takes into account the estimated impact on Analog Devices from the US Government’s recent export restrictions on a large communications company.

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Earnings Preview: Watch out for outlook updates from Salesforce Q2 earnings

Salesforce (NYSE: CRM) stock performance has remained muted in the last 12 months. After the solid Q4 results, shares touched a new 52-week high of $167 mark in late April but tapered off as the outlook failed to impress the street. The stock price is still trading at $144 mark today, which is about 14% down from April levels. The CRM giant is slated to report its second quarter results on August 22 after the bell.

Will Tableau deal closure aid in outlook lift?

Earlier this month, Salesforce announced that it has completed the Tableau acquisition. The cloud platform acquired the data analytics firm in June for $15.7 billion in an all-stock deal. Post the announcement, the company has raised its fiscal 2020 outlook. Revenue was revised upwards to $16.45-16.65 billion and adjusted EPS of $2.68-2.70.

Since the deal is now closed, Salesforce has hinted this month that it would provide an update on the guidance on Thursday. Investors would be tracking closely whether the firm is revising the outlook on August 22. The street is anticipating top line of $16.64 billion and non-GAAP earnings of $2.64 for the full-year period.

Q2 Expectations

Last quarter, Salesforce saw increased demand for its products from its customers resulting in 24% jump in revenues and 26% jump in adjusted EPS, surpassing street estimates. All four cloud services offerings recorded double-digit growth. Service Cloud joined Sales Cloud reporting $1 billion quarterly run rate, which is a good sign for investors. Thanks to the MuleSoft deal, “Salesforce platform and other” saw a 46% surge in sales.

Investors would be hoping the momentum to continue into the second quarter. Salesforce is expecting second quarter revenue of $3.94-3.95 billion and GAAP loss of 8-7 cents per share. Analysts are anticipating top line to come in at $3.95 billion and adjusted earnings of 47 cents per share.

Looking Ahead

Salesforce is focusing on improving its moat both organically and inorganically. Internally, it’s up-selling and cross-selling its products to its clients. Based on the demand, the cloud provider is augments its offerings catering to the needs of the customers. On the inorganic side, the company has acquired MuleSoft, Datorama and Tableau this year to complement its existing offerings.

The street is guiding Q3 revenue of $4.21 billion and adjusted earnings of 62 cents per share. With the fundamentals intact, shareholders can expect better performance from the firm in the latter half of the year.

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