Nucor earnings beat by $0.08, revenue fell short of estimates
Tuesday, UBS analyst Timothy Arcuri updated the firm’s stance on ON Semiconductor (NASDAQ:ON), which currently trades at $38.25 with a market capitalization of $16.14 billion, raising the price target to $45.00 from the previous $40.00 while maintaining a Neutral stock rating. The adjustment follows ON Semiconductor’s recent quarterly report and guidance for the upcoming June quarter, which slightly surpassed both UBS and broader market predictions. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, with analysts’ targets ranging from $33 to $72.12.
ON Semiconductor’s results for the March quarter were generally in line with expectations, and the company’s guidance for the June quarter was modestly above analyst projections. Despite this, the company’s conference call highlighted multiple challenges that may hinder the pace of recovery into the second half of 2025 and into 2026. The company had previously indicated that its profit margins were under pressure due to underutilization of its manufacturing facilities, but the impact appears to be more significant than initially anticipated. This situation is further exacerbated by competitive pricing pressures in the face of softening demand, reflected in an 18.28% year-over-year revenue decline. InvestingPro data shows the company maintains strong financial health with a "GREAT" overall score of 3.02, supported by a robust current ratio of 4.95.
In response, ON Semiconductor is implementing cost reduction strategies and transformation plans. Additionally, the company is expected to benefit from new Silicon Carbide (SiC) projects with Chinese electric vehicle manufacturers that are projected to begin ramping up in the second half of 2025. These initiatives are anticipated to provide some relief; however, ON Semiconductor’s significant exposure to Tesla (NASDAQ:TSLA) remains a near-term concern for its SiC business segment.
Taking these factors into account, UBS has increased its earnings per share (EPS) estimate for the calendar year 2026 from $3.36 to $3.73. This revision reflects the anticipated benefits of ON Semiconductor’s cost-saving measures, which are expected to reintroduce leverage in the next year. Despite the increase in the price target, UBS reiterated its Neutral rating on ON Semiconductor shares, citing a slower anticipated recovery in EPS. The price target is based on a steady 12x multiple applied to the revised EPS estimate. Currently trading at a P/E of 25.64 with a notable 9% free cash flow yield, ON presents an interesting value proposition. Get deeper insights into ON’s valuation and 13 additional key metrics with a InvestingPro subscription, including exclusive access to the comprehensive Pro Research Report.
In other recent news, ON Semiconductor reported its Q1 2025 earnings, surpassing expectations with earnings per share (EPS) of $0.55 compared to the forecasted $0.52, and revenue of $1.45 billion against an anticipated $1.41 billion. Despite the positive financial results, the company experienced a significant decline in its automotive revenue, which fell 26% sequentially. ON Semiconductor plans to increase its share buybacks to 100% of free cash flow in 2025, highlighting its strategic focus on shareholder returns. BofA Securities adjusted its outlook on the company, reducing the price target to $46 from $48 while maintaining a Buy rating, citing challenges that could impact gross margins and operating expenses. BofA’s revised earnings estimates for fiscal years 2025 and 2026 are $2.27 and $2.75, respectively, marking a downward revision of 7% and 21%. Despite these challenges, BofA highlights ON Semiconductor’s robust free cash flow and low-leveraged balance sheet as positive factors. The company remains optimistic about the growing demand for its silicon carbide technology in the Chinese electric vehicle market.
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