What happened
Semiconductor maker On Semiconductor (ON 3.32%) posted great fourth-quarter results and even better guidance for the year now underway, sending its stock higher to the tune of 9% as of 3:50 p.m. ET Monday, according to data from S&P Global Market Intelligence.
So what
The global semiconductor shortage may be a problem for many organizations, but for chipmakers like On Semiconductor, it's actually a boon. Last quarter's top line of more than $1.84 billion was nearly 28% better than the year-earlier figure, capping off a fiscal year of comparable growth. Operating earnings of $1.09 per share for the final quarter of 2021 rolled in three times greater than the comp of $0.35, topping estimates of $0.94.
"Operating income and free cash flow increased 6 times faster than the revenue as we focus our portfolio on secular megatrends of electric vehicles, ADAS, alternative energy and industrial automation," CEO Hassane El-Khoury said in a press release. "We continue to expand gross margins as we shift our mix into these high-value strategic markets while ramping new products, rationalizing our manufacturing footprint, and improving our overall cost structure."
Image source: Getty Images.
In this vein, perhaps the bigger driver of today's gains is the company's outlook for the first quarter of 2022. On Semiconductor is calling for revenue of somewhere between $1.85 billion and $1.95 billion, and profits of between $0.98 and $1.10 per share. Both of those ranges, however, are higher than the consensus estimates of $1.78 billion and $0.81, respectively.
Now what
Moves like the one On Semiconductor is dishing out today are often a tough act to follow. That concern is amplified by the fact that shares started Monday up 50% for the past 12 months, leaving it ripe for some profit-taking. And that's factoring in January's sizable setback.
This is a scenario, however, where there's room and reason for more upside from the stock. The company's experiencing more demand than it can feasibly deal with here, and this looks like it's going to be the case for the foreseeable future. The stock's also only trading at around 18 times the current fiscal year's earning projection, which is below the technology sector's typical valuation for its high-growth names.
