ON Semiconductor Posts Q4 Beat & Upbeat Guidance; Shares Up 8.4%

ON Semiconductor (NASDAQ: ON) shares jumped 8.4% on February 7 to close at $62.26, after the semiconductor components supplier company delivered a blowout fourth-quarter results. ON also provided guidance for the first quarter of FY2022, which exceeded analysts’ expectations.

The quarterly beat was attributed to robust performance across all segments driven by the success of transformation initiatives in 2021. 

Q4 Beat

Markedly, adjusted earnings of $1.09 per share more than trebled year-over-year and beat analysts’ expectations of $0.94 per share. The company reported earnings of $0.35 per share for the prior-year period.

Furthermore, revenues jumped 27.7% year-over-year to $1.84 billion and exceeded consensus estimates of $1.79 billion. On top of this, adjusted gross margins expanded 1080 bps to 45.2%.

FY2022 Outlook

Based on robust Q4 results, management issued the financial guidance for the first quarter of FY2022.

The company forecasts adjusted earnings for Q1 in the range of $0.98 to $1.1 per share, while the consensus estimate is pegged at $0.81 per share. Revenues are forecast to be in the range of $1.85 billion to $1.95 billion, versus the consensus estimate of $1.78 billion.

CEO Comments

ON Semiconductor CEO, Hassane El-Khoury, commented, “We continue to expand gross margins as we shift our mix into these high-value strategic markets while ramping new products, rationalizing our manufacturing footprint, and improving our overall cost structure”.

Looking ahead into FY2022, he further added, “Outlook for our business remains robust as evidenced by over 60% year-over-year growth in our design win funnel driven by our highly differentiated intelligent power and sensing portfolio”.

Wall Street’s Take

Following the upbeat Q4 results, Stifel analyst Tore Svanberg increased the price target on the stock to $64 (2.79% upside potential) from $58 and reiterated a Hold rating.

Consensus among analysts is a Strong Buy based on 9 Buys, 3 Holds, and 1 Sell. The average ON Semiconductor price target of $71.77 implies 15.27% upside potential to current levels.

TipRanks’ Smart Score

ON scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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