ON Semiconductor's stock falls on Q4 guidance
ON Semiconductor (ON) shares are lower in early trading. The chipmaker beat expectations for third quarter earnings. However, the company issued disappointing guidance for the fourth quarter. ON Semiconductor foresees fourth quarter revenue of $1.95 billion to $2.05 billion, which disappointed investors. Yahoo Finance's Diane King Hall and Brad Smith break down the details.
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Video Transcript
- We are also watching ON Semiconductor after releasing its third quarter results. The company beat Wall Street expectations. Revenue and adjusted EPS coming in slightly higher than what analysts anticipated. But importantly, the company gave a weaker fourth quarter earnings forecast. ON now predicts Q4 revenue of between $1.95 billion to $2.05 billion, which would represent a year-over-year decline from its more than $2.1 billion previously.
Now, it's only down about 3% in the early action today. It was down much worse in the aftermarket, and it was down in the premarket as well. But you're seeing kind of a little bit of a cooling of how sharp that turn was. TD Cohen's got a note out on ON Semi. Headline, nothing broken but a dented hood.
So it's basically saying-- they put this out at 10:00 o'clock last night, so they were working hard-- that it was an ugly stock reaction. But they felt like it was in the long term, a little overblown in terms of that reaction. So you're seeing, I guess, some of that play out now that people have had time to digest it.
They noted that it's this reaction a reversal from On Semi's pristine execution and actions to de-risk its model over the past couple of years. There was this element of uncertainty with regard to SIC, the silicon carbide business. And that just putting some pressure. But saying that this looks like just a speed bump for ON Semi.
BRAD SMITH: Yeah. Two big things that I took away from this report. Number one, the PSG part of this business, which, if anybody is looking at the acronyms that they use for each of the segments of their business, this is the Power Solutions Group. They generate the most revenue. Nothing at least in terms of the headline figures that they reported there that should cause too much alarm. The year-over-year move higher was about 10%.
However, there was weakness-- and this is the other part of it-- in two of their other segments here. And that is the Advanced Solutions Group here. As you think about where that revenue base comes in, it's typically one of the second largest producers of revenue for the business. That was down 15% year-over-year. And then you've got the Intelligent Sensing Group. That was down year-over-year as well by about 4%.
So all in, that's what drove the majority of these year-over-year declines in revenue across the business segments. So if there is anything investors or the analysts are paying close attention to here on the day, I imagine it's those. Those are the two areas of weakness out of the three business segments for this company.
