FormFactor (FORM) Up 13.4% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for FormFactor (FORM). Shares have added about 13.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is FormFactor due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
FormFactor Q3 Earnings Beat, Revenues Fall Y/Y
FormFactor delivered third-quarter 2023 adjusted earnings of 22 cents per share, which surpassed the Zacks Consensus Estimate by 29.41%. However, the bottom-line figure decreased 8.3% year over year.
Revenues of $171.6 million beat the Zacks Consensus Estimate by 2.53% but declined 5.1% on a year-over-year basis.
The top-line decline was primarily attributed to softness in probe cards. Weak demand for DRAM and Flash hurt top-line growth. Nevertheless, FormFactor witnessed continued growth in the systems business.
Segments in Detail
Probe card revenues were $128.4 million, down 7.9% year over year.
Foundry & Logic (accounting for 56.2% of revenues) revenues were $96.4 million, up 6.4% year over year.
DRAM revenues (16% of revenues) were $27.5 million, down 17.1% year over year. Flash revenues (2.6% of revenues) were $4.5 million, down 67.6% year over year.
Systems revenues (25.2% of revenues) were $43.2 million, up 4.1% year over year.
Regionally, revenues generated from the United States, Taiwan and South Korea increased 14.7%, 16.8% and 21.5% year over year, respectively.
Revenues generated from China, Europe, Japan, Malaysia, Singapore, and the Rest of World were down 40.6%, 21.2%, 9.1%, 7.7%, 64.4% and 50%, respectively, year over year.
Operating Results
In third-quarter 2023, gross margin contracted 280 basis points (bps) year over year to 41.8% in the reported quarter.
Non-GAAP operating expenses increased 10.1% year over year to $54.5 million. As a percentage of revenues, operating expenses were 440 bps year over year to 31.8%.
Non-GAAP operating margin contracted 150 bps year over year to 10.1%.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash and cash equivalents and marketable securities were $244.4 million compared with $236.9 million on Jul 1.
Cash generated from operating activities was $20.6 million for the reported quarter, down from $22.5 million in the previous quarter.
Free cash flow was $16.9 million for the reported quarter, up from $2.1 million reported in the previous quarter.
Guidance
FormFactor expects fourth-quarter 2023 revenues of $165 million (+/- $5 million).
Revenue guidance reflects a moderate decline on a sequential basis due to the sale of FRT and weaker Foundry & Logic probe card demand, primarily attributed to a short-term reduction in customer spending.
The company expects a non-GAAP gross margin of 41% (+/- 1.5%).
On a non-GAAP basis, FormFactor expects earnings of 20 cents (+/- 4 cents) per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted -12.31% due to these changes.
VGM Scores
At this time, FormFactor has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, FormFactor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
FormFactor is part of the Zacks Electronics - Semiconductors industry. Over the past month, Advanced Micro Devices (AMD), a stock from the same industry, has gained 12.4%. The company reported its results for the quarter ended September 2023 more than a month ago.
Advanced Micro reported revenues of $5.8 billion in the last reported quarter, representing a year-over-year change of +4.2%. EPS of $0.70 for the same period compares with $0.67 a year ago.
For the current quarter, Advanced Micro is expected to post earnings of $0.77 per share, indicating a change of +11.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -8.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Advanced Micro. Also, the stock has a VGM Score of F.
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