A month has gone by since the last earnings report for FormFactor (FORM - Free Report) . Shares have lost about 0.8% 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 the most recent earnings report in order to get a better handle on the important catalysts.
FormFactor Beats Earnings & Revenue Estimates in Q4
FormFactor reported fourth-quarter adjusted earnings of 31 cents per share, beating the Zacks Consensus Estimate by 5 cents. Moreover, the reported earnings increased 19% sequentially and 29% year over year.
Revenues increased 6.8% from the year-ago quarter and 4.4% sequentially to $140.9 million. Also, the top line beat the Zacks Consensus Estimate of $136 million. In addition, the figure was slightly above the company’s guided range of $132-$140 million.
Probe card segment revenues were $116.2 million in the fourth quarter, up 4.1% from the last reported quarter. Within the probe card segment, Foundry & Logic sales (accounting for 54% of its total revenues) increased 25% on a sequential basis to $76.7 million.
Revenues for DRAM products (21% of revenues) were $29.6 million, down sequentially.
Flash revenues were $9.9 million, down on a sequential basis. Almost $5.8million of the flash revenues were from NAND flash applications.
Systems revenues in the fourth quarter were $24.7 million, up 5.8% sequentially.
On a non-GAAP basis, gross margin expanded 230 basis points (bps) year over year and 40 bps sequentially to 44.1%. The increase was primarily due to a favorable product mix.
Non-GAAP operating expenses were $37.2 million in the fourth quarter, down $0.3 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
At the end of the fourth quarter, cash and cash equivalents as well as marketable securities were $149.0 million compared with $142.1 million in the last reported quarter.
Free cash flow was $15.8 million, up from $13 million in the last reported quarter.
FormFactor expects first-quarter 2019 revenues between $127 million and $135 million.
On a non-GAAP basis, the company projects gross margin within 41-44% and earnings in the band of 15-21 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -24.64% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise FormFactor has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.