Onto Innovation ONTO is set to report fourth-quarter 2024 earnings on Feb. 06, after the closing bell.

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The Zacks Consensus Estimate for fourth-quarter earnings per share (EPS) has been steady at $1.39 in the past 60 days, suggesting growth of 31.1% from the year-ago quarter’s figure. The company expects non-GAAP EPS in the $1.33-$1.48 range.

The consensus mark for revenues is pegged at $259.4 million, indicating a rise of 18.5% from the year-earlier quarter’s actuals. Management expects revenues in the range of $253-$267 million. 

ONTO’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 6.9%. The company’s shares have gained 19.3% compared with the sub-industry’s growth of 18.3% in the past year.

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Factors Influencing ONTO’s Performance

Steady adoption of its Dragonfly inspection system is likely to have driven a major chunk of ONTO’s top-line performance. Inspection has been a major driving force for the company. The company is anticipated to have almost doubled its inspection revenues for 2024. It aims to further strengthen this segment through the acquisition of Lumina Instruments in October 2024. Lumina’s patented technology enhances high-sensitivity scanning for silicon carbide, gallium nitride and glass substrates in advanced packaging. This strengthens pattern inspection, improves defect detection and expands ONTO’s SAM by $250 million annually within three years.

Onto has also acquired the lithography business from Kulicke and Soffa Industries, Inc., obtaining key intellectual property, including 24 issued patents and eight pending ones, along with a highly experienced team with more than 200 combined years in lithography and wafer applications. Management anticipates the acquisitions to add up to $100 million in annual revenues over the next three years and become earnings-accretive within a year. 

Continued momentum in Advanced nodes, Specialty devices and advanced packaging and Software and services revenues is likely to have contributed to revenue growth. Advanced packaging emerged as one of the largest markets for the metrology business in the third quarter.

The company prioritizes inventory optimization to enhance cash flow efficiency. It exited the third quarter with $308 million in inventory compared with $320 million in the second quarter. It estimates an additional inventory reduction of $8-$10 million for the fourth quarter, highlighting its commitment to operational efficiency and strategic resource management. ONTO further projects its inventory to fall below $300 million at the end of 2024, marking a $50 million reduction from its peak levels in 2023.

Onto Innovation Inc. Price and EPS Surprise

Onto Innovation Inc. price-eps-surprise | Onto Innovation Inc. Quote

Risks related to customer concentration, supply chain challenges and macroeconomic uncertainties remain key concerns for management. Rising expenses are likely to weigh on its margin performance. It anticipates operating costs of $66-$68 million for the fourth quarter, aiming to keep costs stable while optimizing R&D to reduce the impact of recent acquisitions. Onto expects gross margins of 54-55%. Higher than target inventory levels are delaying supply chain cost reductions as the company focuses on reducing existing component stock. 

Our estimate for fourth-quarter operating expenses and gross margin is pegged at $66 million and 54.8%, respectively.

Key Recent Developments

In January 2025, Onto Innovation secured a $69 million volume purchase deal with a top DRAM manufacturer. The deal spans ONTO’s rich portfolio of common films, optical critical dimension and integrated metrology solutions. On the same day, it also announced key advancements in its product suite for 3D interconnect process control, unveiling the 3Di technology on the Dragonfly G3 system and the new EchoScan system.

What Our Model Predicts

Our proven model does not conclusively predict an earnings beat for Onto Innovation this time around. The combination of a positive Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here.

Earnings ESP: ONTO has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: ONTO currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are a few stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

QUALCOMM Incorporated QCOM currently has an Earnings ESP of +3.34% and a Zacks Rank #2. 

QCOM is scheduled to report quarterly earnings on Feb. 5. The Zacks Consensus Estimate for QCOM’s to-be-reported quarter’s earnings and revenues is pegged at $2.93 per share and $10.92 billion, respectively. Shares of QCOM have gained 15.8% in the past year.

Amazon.com, Inc. AMZN has an Earnings ESP of +4.78% and a Zacks Rank #2 at present. AMZN is scheduled to report quarterly figures on Feb. 6. The Zacks Consensus Estimate for AMZN’s to-be-reported quarter’s earnings and revenues is pegged at $1.52 per share and $187.28 billion, respectively. Shares of AMZN have surged 51.2% in the past year.

Airbnb ABNB has an Earnings ESP of +38.46% and a Zacks Rank #3 at present. Airbnb is set to report fourth-quarter 2024 results on Feb. 13. The Zacks Consensus Estimate for ABNB’s to-be-reported quarter’s earnings and revenues is pegged at 63 cents per share and $2.42 billion, respectively. ABNB shares have lost 10.1% in the trailing 12 months.

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