NEW YORK (TheStreet) -- Shares of ON Semiconductor Corp. (ONNN) are up 5.87% to $9.56 after the company announced that the board of directors approved a new capital allocation policy and a $1 billion share repurchase program.
The Phoenix-based semiconductor components company said that the new capital allocation policy would return approximately 80% of free cash flow less repayments of long-term debt to shareholders.
"The new capital allocation policy demonstrates ON Semiconductor's strong commitment towards efficient use of capital and maximizing shareholder value," CEO Keith Jackson said.
"The long term outlook for our business remains strong, driven by a robust design win pipeline, and we are confident in our ability to generate approximately $300 million to $400 million of annual free cash flow on a sustained basis in the near to mid-term," Jackson added.
Separately, TheStreet Ratings team rates ON SEMICONDUCTOR CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ON SEMICONDUCTOR CORP (ONNN) a HOLD. The primary factors that have impacted our rating are mixed--some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and reasonable valuation levels. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, ONNN's share price has jumped by 28.79%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- Despite its growing revenue, the company underperformed as compared with the industry average of 18.6%. Since the same quarter one year prior, revenues rose by 16.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- ON SEMICONDUCTOR CORP's earnings per share declined by 18.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ON SEMICONDUCTOR CORP turned its bottom line around by earning $0.33 versus -$0.20 in the prior year. This year, the market expects an improvement in earnings ($0.74 versus $0.33).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, ON SEMICONDUCTOR CORP's return on equity is below that of both the industry average and the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has decreased by 19.7% when compared to the same quarter one year ago, dropping from $51.80 million to $41.60 million.
- You can view the full analysis from the report here: ONNN Ratings Report