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What's in the Offing for ON Semiconductor's (ON) Q1 Earnings?

Zacks Equity Research

ON Semiconductor Corporation ON is scheduled to release first-quarter 2019 results on Apr 29.

Notably, the company has beaten the Zacks Consensus Estimate for earnings in the trailing four quarters, with an average positive earnings surprise of 7.3%.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

Sturdy adoption and favorable product mix of the company’s diversified product portfolio and end-markets is driving the stock. Notably, shares of ON Semi have returned 36.9% year to date, substantially outperforming the industry’s rally of 31.9%.



What to Expect in Q1

For the first quarter of 2019, the Zacks Consensus Estimate for earnings is pegged at 40 cents, in line with the year-ago figure.

The consensus estimate for revenues stands at $1.39 billion, suggesting an improvement of almost 1% from the year-ago reported quarter. ON Semi forecasts revenues to be in the range of $1.365-$1.415 billion (mid-point $1.39 billion).

Factors Likely to Influence Q1 Results

Strength in server, ADAS portfolio, and increasing content over major platforms, are anticipated to favor the company’s automotive segment in the to-be-reported quarter.

In fact, in the first quarter, ON Semi’s automotive segment registered impressive design wins for its latest CMOS image sensors including NVIDIA NVDA which is likely to lead to incremental revenues, in turn positively impacting the top line in the first quarter.

Further, strength in company’s high and medium voltage power modules, image sensors, machine vision line of products are likely to aid segmental performance of Industrial end-market.

Growing influence of ON Semi’s products in medical domain, primarily in hearing and personal diagnostics markets holds promise. This is expected to positively impact the upcoming earnings release.

With an aim to further enhance footing in the Automotive and Industrial end-markets, ON Semi rolled out two latest MOSFET devices based on silicon carbide (SiC), in the quarter under review.

ON Semiconductor Corporation Price and EPS Surprise

ON Semiconductor Corporation Price and EPS Surprise | ON Semiconductor Corporation Quote

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Notably, the Zacks Consensus Estimate for revenues for Automotive and Industrial end markets is pegged at $466 million and $383 million, suggesting an improvement of around 4.6% and 5.9%, respectively, from the year-ago quarter.

Meanwhile, the Zacks Consensus Estimate for revenues for Computing and Communications end markets stands at $150 million and $240 million, almost in line with the respective year-ago figures.

Accelerated deployment of 5G is spurring demand for the company’s medium voltage MOSFETs, which are expected to support Communications end-market performance in the first quarter.

However, softness in smartphone market and stabilizing capital expenses by cloud service providers (CSPs) are likely to negatively impact the to-be-reported quarter.

Primarily sluggishness in Greater China is likely to negatively impact Consumer end market revenues. The Zacks Consensus Estimate for revenues for Computing and Communications end markets is pegged at $150 million, indicating a decline of 17.4% from the year-ago figure.

What the Zacks Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

ON Semiconductor has a Zacks Rank #3 and an Earnings ESP is -2.09%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a couple of stocks which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming release:

Shopify, Inc. SHOP has an Earnings ESP of +7.14% and a Zacks Rank #2. The company is slated to report first quarter 2019 earnings on Apr 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Acacia Communications, Inc. ACIA has an Earnings ESP of +5.73% and a Zacks Rank #2 stock. The company is set to report first quarter 2019 earnings on May 2.

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Shopify Inc. (SHOP) : Free Stock Analysis Report
 
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Zacks Investment Research