Why Is ON Semiconductor Corp. (ON) Up 0.9% Since Last Earnings Report?
It has been about a month since the last earnings report for ON Semiconductor Corp. (ON). Shares have added about 0.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is ON Semiconductor Corp. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
onsemi's Q4 Earnings Beat Estimates, Revenues Down Y/Y
onsemi reported fourth-quarter 2023 non-GAAP earnings of $1.25 per share, outpacing the Zacks Consensus Estimate by 3.3% but declining 5.3% year over year.
Revenues of $2.02 billion beat the Zacks Consensus Estimate by 0.7% but declined 4.1% on a year-over-year basis.
Top-Line Details
Power Solutions Group revenues of $1.09 billion (accounting for 53.8% of revenues) increased 3.6% year over year. The figure beat the Zacks Consensus Estimate by 2.68%.
Advanced Solutions Group revenues of $624.6 million (30.9% of revenues) decreased 10.9% on a year-over-year basis. The figure beat the consensus mark by 1.45%.
Intelligent Sensing Group revenues of $307.7 million (15.2% of revenues) fell 13.2% year over year. However, the figure missed the consensus mark by 6.09%.
In terms of end markets, Automotive (55.2% of revenues) revenues were $1.11 billion, up 12.7% year over year. The figure also beat the Zacks Consensus Estimate by 1.33%.
Industrial (24.6% of revenues) end-market (including military, aerospace and medical) revenues decreased 10% year over year to $497.1 million. The figure lagged the consensus mark by 11.4%.
Others (20.2% of revenues) end-market revenues declined 27.7% year over year to $406.8 million. The figure beat the consensus mark by 19.42%.
Operating Details
Non-GAAP gross margin contracted 170 basis points (bps) year over year to 46.7%.
Non-GAAP operating expenses increased 2% year over year to $306.4 million.
Non-GAAP operating margin was 31.6%, down 260 bps on a year-over-year basis.
Balance Sheet & Cash Flow
As of Dec 31, 2023, onsemi had cash and cash equivalents of $2.48 billion compared with $2.68 billion as of Sep 29, 2023.
Total debt (including the current portion), as of Dec 31, 2023, was $3.34 billion, down from $3.45 billion reported as of Sep 29.
Fourth-quarter 2023 cash flow from operations amounted to $611.2 million compared with the previous quarter’s reported figure of $566.6 million.
Free cash flow amounted to $220.7 million compared with free cash flow of $133.6 million in the previous quarter.
Guidance
For the first quarter of 2024, onsemi expects revenues between $1.80 billion and $1.90 billion.
Non-GAAP gross margin is projected in the range of 44.5-46.5%.
Non-GAAP operating expenses are expected in the range of $305-$320 million.
Non-GAAP earnings are envisioned between 98 cents per share and $1.10 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -6.21% due to these changes.
VGM Scores
At this time, ON Semiconductor Corp. has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, ON Semiconductor Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
ON Semiconductor Corp. is part of the Zacks Semiconductor - Analog and Mixed industry. Over the past month, M/A-Com (MTSI), a stock from the same industry, has gained 13.7%. The company reported its results for the quarter ended December 2023 more than a month ago.
M/A-Com reported revenues of $157.15 million in the last reported quarter, representing a year-over-year change of -12.7%. EPS of $0.58 for the same period compares with $0.81 a year ago.
M/A-Com is expected to post earnings of $0.58 per share for the current quarter, representing a year-over-year change of -26.6%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.3%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for M/A-Com. Also, the stock has a VGM Score of F.
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