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FormFactor (FORM) Down 10.3% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for FormFactor, Inc. (FORM - Free Report) . Shares have lost about 10.3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 catalysts.
FormFactor Beats on Earnings and Revenues in Q4
FormFactor Inc. reported fourth-quarter 2016 earnings of 16 cents, which beat the Zacks Consensus Estimate by 3 cents. The stock was up 1.6% in Wednesday’s after- hours trading.
Revenues
Revenues of $123.9 million were up 0.5% sequentially and 72.6% year over year. Also, revenues beat the Zacks Consensus Estimate of $120.3 million and came in almost at the higher end of the company’s guidance of $116–$124 million.
The improvement was driven by continued strength in the FormFactor core probe card business as well as the growing probe card and engineering systems businesses from Cascade Microtech.
FormFactor’s revenues of $383.9 million in 2016 were up 36% from $282.4 million in 2015.
Revenues by Geography
North America contributed 31.9% to fourth-quarter revenues (down 0.3% sequentially but up 291.1% year over year); Asia pacific accounted for 26% (down 8.5% sequentially but up 55.6% year over year); South Korea brought in 17.4% (up 22% sequentially and 1.9% year over year); Japan accounted for 13.6% (up 19.9% sequentially and 238% year on year); Europe/Middle East contributed 10.6% (down 20.6% sequentially but up 47.2% yearover year) and rest of the world contributed 0.6% (up 133.3% sequentially).
Revenues by End User
Foundry & Logic revenues were $68.5 million, down 9.6% from the prior quarter but up 87.7% from the year-ago quarter.
Reported revenues for DRAM products were $24.1 million, up 8.1% sequentially but down 13.7% year over year.
Flash revenues were $6 million, up 13.2% from the previous quarter and 215.8% from the year-ago period. Systems revenues were $25.3 million, up 22.8% sequentially.
Margins
Non-GAAP gross profit was $40.3 million, down from $52.1 million last quarter. Gross margin of 32.5% was up 1048 bps sequentially but down 76 bps year over year. The increase was attributed to higher revenues and a favorable product mix.
Adjusted operating expenses were $27.3 million, up 119.7% sequentially and 28.3% year over year. Operating margin of 12.0% was up both sequentially as well as year over year.
Pro-forma net income was $13 million in the fourth quarter compared with $0.4 million in the year-ago quarter.
On a GAAP basis, net loss in the fourth quarter was $15.4 million (or loss of 22 cents) compared with net loss of $0.62 million (loss of a penny) in the year-ago period.
Balance Sheet
FormFactor exited the quarter with cash (comprising cash and cash equivalent, and Marketable securities) of $108.9 million, up from $107.4 million reported in the prior quarter. Free cash flow was $15.2 million in the fourth.
Guidance
Management expects first-quarter 2017 revenues in a range of $120–$128 million. On a GAAP basis, the company projects gross margin of 34-37% and fully diluted income per share of 0-6 cents. On a non-GAAP basis, gross margin is expected in a range of 41–44% and earnings per share are projected in a range of 17-23 cents. Cash flow is expected to be positive 3 million to $15 million, excluding acquisition-related payments.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
At this time, FormFactor's stock has a great Growth Score of 'A', lagging a lot on the momentum front with 'F'. 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.
Based on our scores, the stock is more suitable for growth investors than value investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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FormFactor (FORM) Down 10.3% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for FormFactor, Inc. (FORM - Free Report) . Shares have lost about 10.3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 catalysts.
FormFactor Beats on Earnings and Revenues in Q4
FormFactor Inc. reported fourth-quarter 2016 earnings of 16 cents, which beat the Zacks Consensus Estimate by 3 cents. The stock was up 1.6% in Wednesday’s after- hours trading.
Revenues
Revenues of $123.9 million were up 0.5% sequentially and 72.6% year over year. Also, revenues beat the Zacks Consensus Estimate of $120.3 million and came in almost at the higher end of the company’s guidance of $116–$124 million.
The improvement was driven by continued strength in the FormFactor core probe card business as well as the growing probe card and engineering systems businesses from Cascade Microtech.
FormFactor’s revenues of $383.9 million in 2016 were up 36% from $282.4 million in 2015.
Revenues by Geography
North America contributed 31.9% to fourth-quarter revenues (down 0.3% sequentially but up 291.1% year over year); Asia pacific accounted for 26% (down 8.5% sequentially but up 55.6% year over year); South Korea brought in 17.4% (up 22% sequentially and 1.9% year over year); Japan accounted for 13.6% (up 19.9% sequentially and 238% year on year); Europe/Middle East contributed 10.6% (down 20.6% sequentially but up 47.2% yearover year) and rest of the world contributed 0.6% (up 133.3% sequentially).
Revenues by End User
Foundry & Logic revenues were $68.5 million, down 9.6% from the prior quarter but up 87.7% from the year-ago quarter.
Reported revenues for DRAM products were $24.1 million, up 8.1% sequentially but down 13.7% year over year.
Flash revenues were $6 million, up 13.2% from the previous quarter and 215.8% from the year-ago period. Systems revenues were $25.3 million, up 22.8% sequentially.
Margins
Non-GAAP gross profit was $40.3 million, down from $52.1 million last quarter. Gross margin of 32.5% was up 1048 bps sequentially but down 76 bps year over year. The increase was attributed to higher revenues and a favorable product mix.
Adjusted operating expenses were $27.3 million, up 119.7% sequentially and 28.3% year over year. Operating margin of 12.0% was up both sequentially as well as year over year.
Pro-forma net income was $13 million in the fourth quarter compared with $0.4 million in the year-ago quarter.
On a GAAP basis, net loss in the fourth quarter was $15.4 million (or loss of 22 cents) compared with net loss of $0.62 million (loss of a penny) in the year-ago period.
Balance Sheet
FormFactor exited the quarter with cash (comprising cash and cash equivalent, and Marketable securities) of $108.9 million, up from $107.4 million reported in the prior quarter. Free cash flow was $15.2 million in the fourth.
Guidance
Management expects first-quarter 2017 revenues in a range of $120–$128 million. On a GAAP basis, the company projects gross margin of 34-37% and fully diluted income per share of 0-6 cents. On a non-GAAP basis, gross margin is expected in a range of 41–44% and earnings per share are projected in a range of 17-23 cents. Cash flow is expected to be positive 3 million to $15 million, excluding acquisition-related payments.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
FormFactor, Inc. Price and Consensus
FormFactor, Inc. Price and Consensus | FormFactor, Inc. Quote
VGM Scores
At this time, FormFactor's stock has a great Growth Score of 'A', lagging a lot on the momentum front with 'F'. 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.
Based on our scores, the stock is more suitable for growth investors than value investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.