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Why Is ON Semiconductor Corp. (ON) Up 5.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for ON Semiconductor Corp. (ON - Free Report) . Shares have added about 5.2% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

onsemi’s Q2 Earnings & Revenues Top Estimates, Up Y/Y

onsemi reported second-quarter 2022 non-GAAP earnings of $1.34 per share, outpacing the Zacks Consensus Estimate by 6.35%. The company had reported earnings of 63 cents per share in the year-ago quarter.

Revenues of $2.09 billion beat the Zacks Consensus Estimate by 3.4% and improved 7.2% on a year-over-year basis.

Top-Line Details

Power Solutions Group or PSG revenues of $1.06 billion (accounting for 50.7% of revenues) increased 7.1% year over year.

Advanced Solutions Group or ASG revenues of $716.7 million (34.4% of revenues) increased 4% on a year-over-year basis.

Intelligent Sensing Group or ISG revenues of $311.3 million (14.9% of revenues) improved 15.7% year over year.

In terms of end markets, Automotive (37.6% of revenues) revenues were $784 million, up 41% year over year. Industrial (27.9% of revenues) end-market (includes military, aerospace and medical) revenues increased 34.3% year over year to $581.8 million. Other (34.5% of revenues) end-market revenues grew 5.6% year over year to $719.2 million.

Operating Details

Non-GAAP gross margin was 49.4% compared with the year-ago quarter’s 32.9%.

Non-GAAP operating expenses increased 0.7% year over year to $317.9 million.

Non-GAAP operating margin was 34.5%, significantly up from the year-ago quarter’s figure of 16.8%, courtesy of a higher revenue base and improvement in gross margin.

Balance Sheet & Cash Flow

As of Jul 1, 2022, onsemi had cash and cash equivalents of $1.79 billion compared with $1.65 billion on Apr 1, 2022.

Total debt (including the current portion), as of Jul 1, 2022, was $3.21 billion, unchanged from the reported figure on Apr 1, 2022.

Second-quarter 2022 cash flow from operations amounted to $420.8 million compared with the previous quarter’s reported figure of $478.6 million.

Free cash flow amounted to $202.7 million compared with $304.8 million in the previous quarter.

Guidance

For third-quarter 2022, onsemi expects revenues between $2.07 billion and $2.17 billion.

Non-GAAP gross margin is projected in the range of 48-50.5%.
 
Non-GAAP operating expenses are expected to be $319-$334 million.

Non-GAAP earnings are envisioned between $1.25 per share and $1.37 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 7.96% due to these changes.

VGM Scores

Currently, ON Semiconductor Corp. has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise ON Semiconductor Corp. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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