ON Semiconductor Corp. ON is slated to report second-quarter 2015 results on Aug 3. In the last quarter, the company posted a positive earnings surprise of 11.11%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
ON Semiconductor posted strong first-quarter results with both the top line and the bottom line surpassing the respective Zacks Consensus Estimate. This shows that the company’s growth prospects remain intact.
The company witnessed continued strength in orders in the first quarter and expects the momentum to continue in the near-to-mid term based on a solid design win pipeline. The strengthening of the U.S. dollar is expected to moderately affect second-quarter revenues as the company is naturally hedged due to its broad-based business. ON Semiconductor’s well-diversified business and end-market focus typically generate relatively steady revenues throughout the year.
Going forward, ON Semiconductor expects to gain increasing traction with image sensors in the automotive market. The company has high penetration with image sensors in the rear view camera market at the OEM level in North America, Japan and Korea.
The company expects higher sales in the fastest growing applications within automotive. These include automotive cameras, ADAS, door electronics, park assist, LED lighting, advanced ignition systems and engine control.
ON Semiconductor expects to continue to add to its design win pipeline of intelligent power modules from its SSG business.
Also, restructuring measures related to System Solutions Group (SSG) have been completed effectively and should positively contribute to margins in the to-be-reported quarter. 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, thereby boosting the top line. The declining oil prices should also help the automotive market.
The end-market demand trends remain favorable. Management expects all the end-market to improve sequentially in the second quarter, except computing, which is likely to be flat.
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 (Strong Buy), 2 (Buy) or 3 (Hold) 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 22 cents. Hence, the difference is 0.00%.
Zacks Rank: ON Semiconductor’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Albemarle Corp. ALB,with an Earnings ESP of +2.44% and a Zacks Rank #1.
Ashford Hospitality Trust, Inc. AHT, with an Earnings ESP of +4.35% and a Zacks Rank #1.
Jack in the Box inc. JACK, with an Earnings ESP of +2.74% and a Zacks Rank #1.
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