ON Semiconductor Corp. ON is slated to report first-quarter 2015 results on May 4. In the last-reported quarter, ON recorded a positive earnings surprise of 6.25%. Let’s see how things are shaping up for this announcement.
Factors to Consider
ON Semiconductor posted strong fourth quarter results with both the top and bottom lines exceeding the Zacks Consensus Estimate. This indicates that the company’s growth prospects remain intact. The results were driven by higher auto and industrial demand.
ON Semiconductor continues to gain share in the smartphone market with various products such as battery protection, battery chargers, protection devices, filtering and power management ICs. Also, the demand for its lithium-ion battery MOSFETs is expected to accelerate driven by their increased adoption across various smartphone OEMs. Numerous design wins in the smartphone market for display power, LED drivers, camera modules and battery solutions will boost revenues in the upcoming quarter.
Also, restructuring measures related to the System Solutions Group (SSG) have been completed and should positively contribute to margins in the near term. The tailwinds from SSG and the recent acquisitions of Aptina and Truesense will further increase the company’s presence in automotive and industrial end markets, boosting the top line.
For the first-quarter, the company expects revenues in the range of $840.0–$880.0 million, with the mid-point of $860.0 million being marginally below the Zacks Consensus Estimate of $861.0 million. Gross margin is expected to be in the 33.4%–35.4% range both on a GAAP and a non-GAAP basis.
Earnings Whispers?
Our proven model does not conclusively show that ON Semiconductor will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 18 cents. Hence, the difference is 0.00%.
Zacks Rank: ON Semiconductor’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other stocks that you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
- Fabrinet FN with Earnings ESP of +3.33% and a Zacks Rank #3
- Cogent Communications Holdings, Inc. CCOI with Earnings ESP of +33.33% and a Zacks Rank #1
- Hortonworks, Inc. HDP with Earnings ESP of +1.18% and a Zacks Rank #3
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