It has been about a month since the last earnings report for FormFactor (FORM Quick QuoteFORM - Free Report) . Shares have lost about 8.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is FormFactor due for a breakout? 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 Beats Q4 Earnings & Revenue Estimates

FormFactor Inc. reported fourth-quarter adjusted earnings of 44 cents per share, which beat the Zacks Consensus Estimate of 39 cents. The figure increased 12.8% sequentially and 7.3% year over year.

Revenues increased 10.3% from the year-ago quarter and 10.7% sequentially to $197 million. Also, the top line surpassed the Zacks Consensus Estimate by 7.09%.

The top line was driven by strong demand for both Foundry & Logic probe cards, along with strength in advanced packaging. Customer node transitions and new design releases also aided revenues.

Management continues to expect strong demand for Foundry & Logic probe cards in the near term due to acceleration of 5G handset pilot production and persistent spending on work-from-home infrastructure.

Quarter Details

Probe card segment revenues were $162.5 million for the fourth quarter, up 7% from the prior quarter. The increase was driven by foundry and logic, and DRAM revenue, partially offset by decline in flash revenue.

Within the probe card segment, Foundry & Logic sales (accounting for 62% of its total revenues) increased on a sequential basis to $123 million.

Systems revenues for the fourth quarter were $45 million, up 27% sequentially.

Revenues for DRAM products (18% of revenues) were $35 million, reflecting an increase of $3 million from the third quarter.

Flash revenues (3% of revenues) were $5 million, down on a sequential basis.

Operating Details

On a non-GAAP basis, gross margin contracted 230 basis points (bps) year over year and 330 bps sequentially to 43.4%. The decrease was mainly due to unfavorable product mix in the System segment.

Non-GAAP operating expenses were $48.1 million for the fourth quarter, up from $43.8 million in the prior-year period. The increase was due to higher investments.

Balance Sheet & Cash Flow

At fourth quarter-end, cash and cash equivalents, as well as marketable securities were $255 million compared with $241.5 million in the third quarter.

Cash flow from operations was $45 million versus $41.8 million in the third quarter. Free cash flow was $31.4 million, down from $37.2 million in the third quarter.

Guidance

FormFactor expects first-quarter 2021 revenues between $176 million and $188 million.

On a non-GAAP basis, the company projects gross margin within 44-47% and earnings in the band of 34-42 cents per share.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

Currently, FormFactor has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Outlook

FormFactor has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.