A month has gone by since the last earnings report for FormFactor (FORM - Free Report) . Shares have added about 0.3% 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 the most recent earnings report in order to get a better handle on the important catalysts.
FormFactor Beats Earnings & Revenue Estimates in Q3
FormFactor Inc. reported third-quarter adjusted earnings of 26 cents per share, beating the Zacks Consensus Estimate by 3 cents. However, earnings decreased 3.7% sequentially and 23.5% year over year.
Revenues decreased 6.1% from the year-ago quarter and 0.4% sequentially to $135 million. However, the top line beat the Zacks Consensus Estimate by 0.36%. The figure was within the company’s guided range of $130-$138 million.
The company's shares have lost 21.8% on a year-to-date basis against the industry’s decline of 10.6%.
Probe card segment revenues were $111.6 million in the third quarter, remaining flat with the last reported quarter.
Within the probe card segment, Foundry & Logic sales (45% of the total revenues) decreased on a sequential basis to $61.2 million.
Revenues for DRAM products (28% of the revenues) were $37.4 million, down 1.8%sequentially. Management stated that DRAM demand environment was robust in the quarter. Technology node transitions and a strong datacenter demand environment continued to positively impact probe card demand.
Flash revenues were $13 million, up 14% sequentially. Almost $8million of the flash revenues were from NAND flash applications.
Systems revenues in the third quarter were $23.4 million.
On a non-GAAP basis, gross margin contracted 80 basis points (bps) year over year and 20 bps sequentially to 43.7%. The decrease was primarily due to an unfavorable product mix.
Non-GAAP operating expenses were $37.5 million in the third quarter, down $2.1 million from the last reported quarter. The decrease was due to employee-related costs, including lower performance-based compensation, coupled with benefits and disciplined spending.
Balance Sheet & Cash Flow
As of Sep30, 2018, cash (comprising cash and cash equivalents as well as marketable securities) was $142.1million compared with $142.9 million in the last reported quarter.
Free cash flow was $13 million, down from $16.8 million in the last reported quarter.
FormFactor expects fourth-quarter 2018 revenues between $132 million and $140 million.
On a non-GAAP basis, the company projects gross margin within 42-45% and earnings in the band of 23-29 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 15.71% due to these changes.
At this time, FormFactor has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, FormFactor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.