FormFactor (FORM) Down 11% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for FormFactor (FORM). Shares have lost about 11% 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 Q4 Earnings Beat, Revenues Fall Y/Y
FormFactor reported fourth-quarter 2022 adjusted earnings of 5 cents per share, which surpassed the Zacks Consensus Estimate by 66.7%. However, the bottom line decreased by 88.6% year over year.
Revenues of $165.99 million surpassed the Zacks Consensus Estimate of $155.45 million. However, the figure declined by 19% on a year-over-year basis.
The top-line decline was primarily attributed to softness in probe cards. Weak demand for DRAM and Foundry & Logic remained a concern.
Nevertheless, strong demand for Flash and Systems was a positive.
Segments in Detail
Probe card: Revenues from this segment were $124.4 million for the fourth quarter, down 25% year over year.
Foundry & Logic’s (accounting for 49.5% of revenues) revenues were $82.1 million, down 27.9% year over year.
Revenues for DRAM products (16.4% of revenues) were $27.3 million, reflecting a decrease of 32.3% year over year.
Flash’s revenues (9% of revenues) were $15 million, up 29.3% from the year-ago period’s level.
Systems: Revenues from this segment were $41.6 million (25.1% of revenues), up 6.4% year over year.
Revenues generated from the United States, Europe, Singapore and the Rest of World were $32.8 million, $11 million, $11 million and $2.8 million, respectively. Revenues in United States and Europe declined 4.9% and 1.8%, respectively. Nevertheless, revenues in Singapore and Rest of the World increased 8.9% and 40% year over year, respectively.
Revenues generated from Taiwan, China, South Korea, Malaysia and Japan were $29.9 million, $35.8 million, $26.2 million, $5.1 million and $11.4 million, respectively. Revenues from Taiwan, China, South Korea and Malaysia were down 36.2%, 4.8%, 33.2% and 65.3%, respectively, year over year.
Revenues from Japan were up 29.5% from year-ago quarter.
On a non-GAAP basis, gross margin significantly contracted from 44.3% in the year-ago quarter to 31.7% in the reported quarter.
Non-GAAP operating expenses decreased 3.6% year over year to $47.9 million. As a percentage of total third-quarter revenues, the metric expanded 460 basis points (bps) year over year to 28.8%.
Non-GAAP operating margin was 2.9%, which contracted significantly from 20.1% in the year-ago quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash and cash equivalents and marketable securities were $238.1 million compared with $251.6 million on Sep 24, 2022.
Cash generated from operating activities was $20.7 million for the reported quarter, down from $24.2 million in the previous quarter.
Capital expenditure was $26.2 million in the fourth quarter. Free cash flow was an outflow of $5.4 million in the same quarter.
FormFactor expects first-quarter 2023 revenues of $162 million (+/- $5 million).
Management expects a non-GAAP gross margin of 37% (+/- 1.5%).
On a non-GAAP basis, it projects earnings of 13 cents (+/- 4 cents) per share.
For the first quarter, the company expects moderate improvement in demand for Foundry & Logic probe cards. However, the outlook for DRAM and Flash memory probe cards is weak.
The Systems business is anticipated to sustain its strong momentum in the first quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 328.57% due to these changes.
At this time, FormFactor has a subpar Growth Score of D, however its Momentum Score is doing a bit better 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 C. 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 these revisions looks promising. Notably, FormFactor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
FormFactor belongs to the Zacks Electronics - Semiconductors industry. Another stock from the same industry, Advanced Micro Devices (AMD), has gained 1% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.
Advanced Micro reported revenues of $5.6 billion in the last reported quarter, representing a year-over-year change of +16%. EPS of $0.69 for the same period compares with $0.92 a year ago.
Advanced Micro is expected to post earnings of $0.56 per share for the current quarter, representing a year-over-year change of -50.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Advanced Micro. Also, the stock has a VGM Score of D.
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