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Onsemi Q4 Preview: Can the Earnings Streak Continue?

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Earnings season continues to chug along, with an extensive list of companies reporting quarterly results daily.

The so-called earnings “apocalypse” many have feared has yet to materialize, with many companies posting better-than-expected results in the face of challenging business conditions.

Now, onsemi (ON - Free Report) is on deck to unveil its quarterly results on Monday, February 6th, before the market open.

Onsemi 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 had its IPO in May 2000.

How does the company currently stack up? We can use results received from Advanced Micro Devices (AMD - Free Report) as a small gauge. Let’s take a closer look.

Advanced Micro Devices Q4

Many had feared weak quarterly results from semiconductors with supply soaring. Still, Advanced Micro Devices posted better-than-expected results, exceeding the Zacks Consensus EPS Estimate by nearly 5% and reporting earnings of $0.69 per share.

AMD generated roughly $5.6 billion in revenue throughout the period, surpassing our consensus revenue estimate by 1.6%.

Further, the company generated $443 million in free cash flow, down from $736 million in the year-ago quarter. Cash from operations totaled $567 million, again declining from the $822 million value in the year-ago quarter.

Dr. Lisa Su, CEO, on the results, “2022 was a strong year for AMD as we delivered best-in-class growth and record revenue despite the weak PC environment in the second half of the year."


Quarterly Estimates –

Analysts have had mixed reactions for the quarter to be reported, with a singular downward and upward earnings estimate revision hitting the tape over the last several months. The Zacks Consensus EPS Estimate of $1.27 suggests a change of roughly 17% Y/Y.

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Image Source: Zacks Investment Research

ON’s top line also appears to be in solid shape; our consensus revenue estimate of $2.1 billion indicates an improvement of more than 12% Y/Y.

Quarterly Performance –

Onsemi has penciled in a remarkable earnings performance, exceeding both earnings and revenue estimates in ten consecutive quarters.

Just in the company’s latest release, ON reported earnings more than 10% above expectations and posted a 3.7% revenue surprise. Below is a chart illustrating the company’s revenue on a quarterly basis.

Zacks Investment Research
Image Source: Zacks Investment Research

Valuation –

Currently, ON shares trade at a 17.2X forward earnings multiple, above the 14.1X five-year median by a fair margin but below the Zacks Computer and Technology sector average.

Zacks Investment Research
Image Source: Zacks Investment Research

Further, the company’s forward price-to-sales currently works out to be 4.2X, again above the 1.8X five-year median.

Zacks Investment Research
Image Source: Zacks Investment Research

Putting Everything Together

Earnings season continues to advance, undoubtedly the most critical period of the entire year for stocks.

Investors have been busy sifting through an extensive list of quarterly results, with just as many slated to report in the coming weeks.

Next week on February 6th, we’ll receive quarterly results from onsemi. Analysts have primarily been mixed in their earnings outlooks, with estimates indicating Y/Y improvements within the top and bottom lines.

Further, the company’s forward P/S and P/E ratios reside above their five-year medians, and the company has consistently exceeded quarterly estimates.

Heading into the release, onsemi (ON - Free Report) is a Zacks Rank #3 (Hold) with an Earnings ESP Score of 0.3%.

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