Fourth Quarter 2011 results for On Semiconductor

Ok, so I've fallen a bit behind on things so there will be a bunch of these coming fast and furious.  The first one I'm going to address it On Semiconductor.

On reported a couple weeks ago now with results that beat street expectations of $0.09 by $0.04 for earnings of $0.13 per share.  This is a pretty handy beat, considering the impacts of the Thai floods on some of the Factories ONNN recently acquired from Sanyo.  The 4th quarter was riddled with closed factories and shifting work streams from those factories to other locations.  If there's any kind of positive to take from this event and the pains it put on the company, it'd be the fact that these issues happened at a time when product cycles were actually near their worst.  Customers had a glut of product and demand was lower than normal over the last half of the year, but is now seen to be picking up and falling into normal cycles again - just in time for ONNN to have all of their facilities up and ready (early second quarter).  Guidance for the first quarter was to expect similar earning as the 4th quarter, so I'd expect earnings of around $0.13 again.  Currently the street's estimates are around $0.09 a share yet - so that's a healthy start toward another beat next quarter.  As for some of this quarter's key data points, margins were down to 31.1%. year over year, however, they are improving as they are up from the previous quarter.  Much of this has to do with the nature of the Sanyo business which was brought into the mix a couple of quarters ago, however, margins were also affected by the decreased demand in products as well.  Product turn around is short at 54 days.  This means customers won't have to wait long to get their orders, which is a good thing.  Management is stating that the first quarter is the last of the down turn they've been experiencing.  Sales-wise, they'll be down, as is usually the case for the first quarter.  Expectations are in line with seasonality of business.  After that, they expect things to pick up into the second quarter and second half of the year.

Let's talk guidance.  On Semi doesn't predict earnings ahead of the current quarter.  As I've already said, expectations are to match results from fourth quarter to first quarter.  Based off of this and other comments by management, my current prediction for earnings for 2012 is $1.  Currently, the stock is selling at 10.5x 2011 earnings.  It's important to note that the market as a whole has been getting stronger this year and if this continues, people will become more willing to pay more for a company's earnings.  However, no market has been that predictable.  I'm going to stick with 10.5 times earnings and put a current price target of $10.50 for the company.  If it pulls back down to $9, I would consider buying more.