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ON Semiconductor Q2 Preview: Do Shares Have More Room to Run?

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Semiconductor stocks have been some of the most rewarding investments over the last several years. However, the fun has come to a screeching halt in 2022, with deep valuation slashes widespread across the industry.

But, the recent strong performance in the major indices is undoubtedly a major positive, signaling that buyers have finally arrived. Simply put, it’s about time.

One company operating within the semiconductor realm, ON Semiconductor ON, is slated to release quarterly results next Monday (August 1st) before the trading session begins.

ON Semiconductor is an original equipment manufacturer of a broad range of discrete and embedded semiconductor components. The company was spun off from Motorola in August 1999 and went public through an IPO in May 2000.

Today, ON shares soared. Let’s take a look at how the company shapes up heading into its quarterly release.

Share Performance & Valuation

Year-to-date, ON shares have decreased by nearly 8% in value but have extensively outperformed its Zacks Computer and Technology Sector.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Month-to-date, the share performance is mind-boggling. ON shares have tacked on 25% in value, crushing its Zacks Sector performance.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The relatively substantial price action is a major positive – investors have been aggressively buying ON shares over the last month, pushing bears back into hibernation.

ON Semiconductor sports rock-solid valuation metrics, as displayed by its Style Score of a B for Value. Its 11.9X forward earnings multiple is nowhere near its 14.3X five-year median and reflects an enticing 44% discount relative to its Zacks Sector.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Quarterly Estimates

Analysts have been rather quiet over the last 60 days, with zero estimate revisions hitting the tape. Look out – the Zacks Consensus EPS Estimate for the quarter resides at $1.26, reflecting a 100% triple-digit growth in quarterly earnings year-over-year.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

In addition, the top-line is in great shape as well – the Zacks Consensus Sales Estimate has ON generating $2 billion in revenue, notching a solid 20% increase in quarterly revenue year-over-year. The chart below illustrates the company’s revenue on a quarterly basis.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Quarterly Performance & Market Reactions

The company has repeatedly posted bottom-line results above expectations – ON has chained together eight consecutive EPS beats. Just in its latest quarter, ON Semiconductor recorded a solid 16% bottom-line beat.

Quarterly sales results have been just as stellar, with the company recording nine top-line beats over its last ten quarters.

Day-traders will appreciate this – over the company’s last four quarterly reports, shares have moved upward each time, all by at least 4%.

Bottom Line

ON is forecasted to register serious top and bottom-line growth. The company has repeatedly exceeded earnings estimates, recent share performance is rock-solid, and the market has had incredible reactions to quarterly releases as of late.

In addition, the company sports solid valuation levels, well below its five-year median and its Zacks Sector.

Currently, ON Semiconductor ON is a Zacks Rank #4 (Sell) with an overall VGM Score of an A.


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