On Aug. 7, ON Semiconductor (ON -4.09%) reported guidance-beating second-quarter 2017 results. The stock jumped in response and is up about 22% so far this year. What's got investors optimistic?

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Q2 by the numbers

The company posted revenue of $1.34 billion in the second quarter, a 52% increase from last year, primarily because of the acquisition of Fairchild Semiconductor. Compared with the first quarter of this year, revenue was down 7%. However, the first quarter had a $155 million one-time gain from an adjustment in revenue recognition. Backing out the accounting change, revenue increased 4% quarter over quarter.

The bottom line was an even better story. Earnings per share were $0.22, compared with $0.06 last year and $0.18 in the first quarter. That represents a 267% and 22% increase, boosted primarily by the rise in revenue and cost savings harvested from the integration of the Fairchild business.

The top-line number slightly beat management's own guidance for as much as $1.335 billion in sales, and gross profit margin was 36.7% versus an outlook of as high as 36.4%.

Business Segment

Q2 2017 -- % of Total Revenue

Year-Over-Gear Growth

Quarter-Over-Quarter Growth





















Data source: ON Semiconductor earnings call.

One plus one is more than two

On the quarterly conference call with analysts, ON CEO Keith Jackson acknowledged that the overall semiconductor industry is growing because hundreds of millions of connection-enabled devices are being deployed around the world. That rising tide has lifted ON as well, but not to be ignored is the company's own actions that have helped boost performance.

Last year's purchase of Fairchild has helped boost the bottom line -- 2017 is expected to end with $180 million in synergies -- but it's more than just simple cost control. Fairchild's portfolio, which consisted primarily of power management equipment, was highly complementary to ON's portfolio of chips and sensors.

The combination has allowed the company to offer a more comprehensive solution to end clients, leading to additional sales opportunities and thus a boost to revenue beyond what was expected. Even though a slowdown in auto sales in the U.S. contributed to flat sequential performance in that segment, global auto growth continued, as well as growth across the board for the rest of the company's operating segments.

Hexagonal icons of various devices, ranging from cars to cameras to smartphones, that connect to the internet.

Image source: Getty Images.

What happens next?

ON is building momentum, and management expects that momentum to continue into the third quarter. Revenue guidance is for $1.34 billion to $1.39 billion, a 4% increase over the just-reported period at the high end of guidance. The gross profit margin is expected to continue rising, too, with guidance of 36% to 38%.

ON's trailing-12-month price-to-earnings ratio sits around 30. That number dips to a very modest 10.5 based on next year's estimated profits, as analysts expect the company to continue to reap benefits from the Fairchild purchase and higher sales.

Don't read too much into the analyst numbers, but it reinforces the positive story unfolding over at ON. With years of potential growth runway ahead of it from the movement to digitally connect the world, this one is worth keeping an eye on.