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Why Is FormFactor (FORM) Up 6.9% Since the Last Earnings Report?
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A month has gone by since the last earnings report for FormFactor, Inc. (FORM - Free Report) . Shares have added about 6.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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.
FormFactor Beats on Earnings and Revenues in Q1
FormFactor reported first-quarter 2017 earnings of 19 cents, which beat the Zacks Consensus Estimate by 3 cents.
Earnings were driven by contribution from acquisition of Cascade Microtech and growth in the core business segments. The acquisition enhanced FormFactor’s product and market diversification, enabling the company to further strengthen its foothold in the semiconductor space.
Also, during the quarter, the company witnessed sequential growth in probe cards for server DRAM, primarily for DDR4 designs at the 20 nanometer node. The company delivered strong shipments of 300 millimeter engineering systems for 10, 7 and 5 nanometer yield improvement. Moreover, the mobile sector gained strength in the quarter, primarily with foundry, logic and DRAM probe cards.
Revenues
Revenues of $128.8 million were up 4.0% sequentially and 140% year over year. Also, revenues beat the Zacks Consensus Estimate of $121.0 million and came in slightly above the company’s guidance of $120–$128 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.
Revenues by Geography
Asia pacific contributed 35.4% of first-quarter revenues (up 41.6% sequentially and 181.5% year over year); North America accounted for 31.4% (up 2.5% sequentially but up 130.1% year over year); South Korea brought in 14.5% (down 13.0% sequentially but up 110.1% year over year); Japan accounted for 11.8% (down 10.1% sequentially but up 390.3% year on year); Europe/Middle East contributed 6.8% (down 33.6% sequentially but up 11.5% year over year) and rest of the world contributed 0.1% (down 85.7% sequentially).
Revenues by Market Segments
Foundry & Logic revenues (58% of total first quarter revenue) were $74.3 million, up 9% from the prior quarter and 105.8% from the year-ago quarter. The strength was driven by continued strength in the data center, mobile, and automotive applications.
Reported revenues for DRAM products were $29.0 million, up 20.3% sequentially 77.9% year over year.
Flash revenues were $3.2 million, down 46.6% from the previous quarter but up 166.7% from the year-ago period. Management expects flash revenues to continue to be lumpy as its exposure to the market remains relatively concentrated.
Systems revenues were $22.3 million, down 11.9% sequentially. The sequential decrease was due to seasonality in this business.
Margins
Non-GAAP gross profit was $54.1 million, up from $11.9 million last quarter. Gross margin of 42.0% was up 945 bps sequentially. The increase was attributed to higher revenues and a favorable product mix.
Adjusted operating expenses were $37.8 million, up 38.6% sequentially and 82.8% year over year. Operating margin of 12.6% was up both sequentially as well as year over year.
Pro-forma net income was $13.9 million in the first quarter compared with net loss of $9.3 million in the year-ago quarter.
On a GAAP basis, net income in the first quarter was $5.2 million (or earnings of 7 cents) compared with net loss of $13.8 million (or loss of 24 cents) in the year-ago period.
Balance Sheet
FormFactor exited the quarter with cash (comprising cash and cash equivalent, and Marketable securities) of $121.9 million, up from $108.9 million reported in the prior quarter.
Cash from operations was $13.0 million in the first quarter versus $2.1 million in the prior quarter. Free cash flow was $15.5 million in the first quarter.
Guidance
Management expects second-quarter 2017 revenues in a range of $130–$138 million. The Zacks Consensus Estimate is pegged at $125.63 million.
On a GAAP basis, the company projects gross margin of 37-40% and fully diluted income per share of 8-14 cents. On a non-GAAP basis, gross margin is expected in a range of 42–45% and earnings per share are projected in a range of 24-30 cents. The Zacks Consensus estimate is pegged at 18 cents.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter.
At this time, the stock has a strong Growth Score of 'A', though it is lagging a bit on the momentum front with a 'C'. Charting the exact same path, 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 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value and momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that 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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Why Is FormFactor (FORM) Up 6.9% Since the Last Earnings Report?
A month has gone by since the last earnings report for FormFactor, Inc. (FORM - Free Report) . Shares have added about 6.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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.
FormFactor Beats on Earnings and Revenues in Q1
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter.
FormFactor, Inc. Price and Consensus
FormFactor, Inc. Price and Consensus | FormFactor, Inc. Quote
VGM Scores
At this time, the stock has a strong Growth Score of 'A', though it is lagging a bit on the momentum front with a 'C'. Charting the exact same path, 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 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value and momentum investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.