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Onto Innovation (ONTO) Down 14.8% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Onto Innovation (ONTO). Shares have lost about 14.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Onto Innovation due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Onto Innovation Q2 Earnings & Revenues Top Estimates

Onto Innovation Inc reported second-quarter 2022 earnings of $1.28 per share, up 39% year over year and beating the Zacks Consensus Estimate by 1.6%.

Revenues of $256.3 million beat the Zacks Consensus Estimate by 6.1%. The top line increased 32.5% year over year. The upside can be attributed to higher demand from several end markets, particularly advanced nodes specialty devices and advanced packaging. The customer acceptance of the company’s JetStep X500 lithography systems also acted as a tailwind.

Revenues from the advanced nodes market were up 47% year over year, while revenues from specialty devices and advanced packaging increased 28% year over year. Software and services revenue was up 19% year over year. Sales from specialty devices and advanced packaging contributed 46% to revenues. Advanced node markets contributed 37% and software and services accounted for 17%.

Margin Details

Total operating expenses increased to $74.7 million, rising 7.4% from $69.5 million in the prior-year quarter.

Non-GAAP gross profit rose to $132.1 million from $105.5 million, with respective margins of 52% and 55%. Non-GAAP operating income was $73.1 million compared with $49.7 million in the year-ago quarter. Non-GAAP operating margin was 29%, up from 26% reported in the prior-year quarter.

Balance Sheet

As of Jul 2, 2022, the company had $545 million in cash and cash equivalents, with $176.7 million of total current liabilities. Accounts receivable stood at $234.7 million.

Q3 Guidance

The company expects revenues of $242-$258 million. Non-GAAP earnings per share are estimated to be $1.21-$1.42.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Onto Innovation has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Onto Innovation has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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