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Why Shares of ON Semiconductor Tumbled Today

By Timothy Green – Feb 3, 2020 at 1:40PM

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Revenue and earnings declines didn't sit well with investors.

What happened

Shares of ON Semiconductor (ON 0.85%) slumped on Monday following a mixed fourth-quarter report. Revenue was down but beat analyst expectations, while the bottom line fell short of estimates. The stock was down about 12% at 12:50 p.m. EST today.

So what

ON Semi reported fourth-quarter revenue of $1.40 billion, down 7% year over year and $20 million above the average analyst estimate. The company said it saw improvements in business trends in the fourth quarter that continued into the first quarter.

A circuit board.

Image source: Getty Images.

Non-GAAP (adjusted) earnings per share came in at $0.30, down from $0.53 in the prior-year period and $0.02 lower than analysts were expecting. Gross margin dipped 3.3 percentage points to 34.6%, while total operating expenses were roughly flat.

While earnings were down substantially, the cash flow situation was much worse. Free cash flow was a loss of $20.7 million in the fourth quarter, down from a gain of $289 million in the prior-year period.

Now what

For the first quarter of 2020, the semiconductor company expects revenue between $1.355 billion and $1.405 billion and gross margin between 33.7% and 34.7%. The company's guidance implies non-GAAP EPS of roughly $0.26. In the first quarter of 2019, the company produced revenue of $1.387 billion and non-GAAP EPS of $0.43.

With another earnings decline coming in the first quarter, investors sent shares of ON Semi tumbling. The stock is now down about 1.7% over the past year.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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