Phoenix-based ON Semiconductor Corp. (NASDAQ: ON – 23.69) reported fourth quarter revenue of $1.378 billion, 9% above last year’s fourth quarter and better than the $1.349 forecast by most analysts. The company’s Analog Solutions and Image Sensor Groups led the way, offset by weakness in the Consumer and Computing Group segments. Adjusted earnings per share came in at $0.39, two cents ahead of Street views. ON management believes they are in the early stages of realizing benefits of recent investments in automotive and industrial end-markets. Also, increased adoption of ADAS, electric vehicles, machine vision and robotics should drive further acceleration in revenue and margins. Demand for products remains strong and based on product booking trends and backlog levels, the company anticipates that total revenue in the first quarter of 2018 will in the range of $1.34 to $1.39 billion. Wall Street targets first quarter earnings of $0.36 per share and full-year results of about $1.60 vs. the $1.46 earned in all of 2017.
ON Semiconductor stock continues to offer solid long-term investment appeal. Despite the excellent momentum that these shares have generated, increasing more than 73% in value over the past twelve months, ON continues to trade at a discount relative to other large-cap semiconductor manufacturers. Greater diversification of the company’s product portfolio seems poised to keep it insulated from market volatility moving forward. In combination with further integration of the Fairchild acquisition, ON should be able to meet its long-term adjusted gross margin goal of 40%. Indeed, these shares still have room to run, and aggressive investors with a 3- to 5-year horizon are encouraged to take a look at this candidate.