ON Semiconductor Corp. (ON) 5% Growth Since Last Earnings Report: Can This Continue?

About a month has passed since ON Semiconductor Corp.’s last earnings report. (HE). Shares rose about 5% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or will ON Semiconductor Corp. Is there a recession coming? 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 better understand the important catalysts.

Onsemi’s profit in the first quarter exceeded estimates, revenue decreased y/y

onsemi reported first-quarter 2024 non-GAAP earnings of $1.08 per share, down 9.2% year-over-year.

Revenues of $1.86 billion surpassed the Zacks Consensus Estimate by 0.61% but declined 4.9% year-over-year.

Top-shelf details

Power Solutions Group revenues of $874.2 million (representing 47% of revenues) increased 1.6% year-over-year.

Analog & Mixed Group revenues of $697 million (37.4% of revenues) decreased 6.4% year over year.

Intelligent Sensing group revenues of $291.5 million (15.6% of revenues) decreased 17.7% year-over-year.

In terms of end markets, automotive revenues (54.6% of revenues) were $1.02 billion, up 3.2% year-over-year.

Industrial revenues (25.6% of revenues) in the end-market (including military, aerospace and medical) declined 14.4% year-over-year to $476.1 million.

Elsewhere (19.8% of revenue), end-market revenue declined 11.5% year-over-year to $369.4 million.

Operational details

Non-GAAP gross margin decreased 90 basis points (bps) year-over-year to 45.9%.

Non-GAAP operating expenses increased 10% year-over-year to $314.3 million.

Non-GAAP operating margin was 29%, down 320 basis points year-over-year.

Balance sheet and cash flow

As of March 29, 2024, onsemi had cash and cash equivalents of $2.61 billion, compared to $2.48 billion as of December 31, 2023.

Total debt (including current portion) as of March 29, 2024 was $3.34 billion and remained unchanged.

First quarter 2024 cash flow from operations was $498.7 million compared to $611.2 million for the prior quarter.

Free cash flow was $276.3 million compared to $220.7 million in the prior-year quarter.

Conductivity

In the second quarter of 2024, onsemi expects revenue of $1.68 billion to $1.78 billion.

Non-GAAP gross margin is forecast in the range of 44.2-46.2%.

Non-GAAP operating costs are expected to be between $313 million and $328 million.

Non-GAAP earnings are expected to range from 86 cents per share to 98 cents per share.

How have estimates changed since then?

It turns out that estimate revisions have been trending downward over the past month.

Due to these changes, the consensus estimate moved -7.34%.

VGM results

At that time, ON Semiconductor Corp. has a weak Growth Score of D, although it lags slightly behind its Momentum Score of F. However, the stock is rated C on the value side, putting it in the mid-20% range for this investment strategy.

Overall, the company’s overall VGM score is F. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. It is worth noting that ON Semiconductor Corp. it has a Zacks Rank of #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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