Why is FormFactor (FORM) up 10.1% since its last earnings report?

It’s been about a month since FormFactor’s (FORM) last earnings report. Shares have risen about 10.1% in that time, outperforming the S&P 500.

Will the recent positive trend continue until its next earnings release, or will FormFactor face a recession? 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 better understand the important catalysts.

FormFactor Q1 Earnings Estimates Delay, Revenues Rise

FormFactor posted first-quarter 2024 adjusted earnings of 18 cents per share, missing the Zacks Consensus Estimate by 5.26%. The financial result increased by 12.5% year on year.

Revenues of $168.7 million surpassed the Zacks Consensus Estimate by 2.24% and increased 0.8% year-over-year. The increase in revenue is primarily attributable to an increase in the number of probe cards.

Segments in detail

Probe card revenue was $136.7 million, up 7.4% year-over-year.

Foundry & Logic revenues (representing 51.5% of revenues) were $86.8 million, down 14.6% year-over-year.

DRAM revenue (27.2% of revenue) was $45.9 million, up 131.8% year-over-year.

Flash revenue (2.4% of revenue) was $4 million, down 32.2% year-over-year.

Systems revenue (19% of revenue) was $32 million, down 20.2% year-over-year.

Regionally, revenues generated in the United States and South Korea increased year-over-year by 21.5% and 143.8%, respectively.

Revenues generated in Taiwan, China, Europe, Japan, Malaysia, Singapore and the rest of the world decreased by 25.8%, 42.4%, 6.4%, 22.7%, 83.2%, 9.4%, respectively. and 40% year on year.

Operational results

In the first quarter of 2024, gross margin increased 30 basis points (bps) year-over-year to 38.7% in the reported quarter.

Non-GAAP operating expenses increased 2.3% year-over-year to $52.3 million. Operating expenses as a percentage of revenue increased 50 basis points year over year to 31%.

Non-GAAP operating margin declined 20 basis points year-over-year to 7.7%.

Balance sheet and cash flow

As of March 30, 2024, cash and cash equivalents and marketable securities were $349.2 million compared to $328.3 million as of December 30, 2023.

Cash generated from operations was $33 million in the reported quarter, compared to $9.25 million in the prior-year quarter.

Free cash flow for the quarter was $19.7 million.

Conductivity

FormFactor expects revenue in the first quarter of 2024 at $195 million (+/- $5 million).

The company expects a non-GAAP gross margin of 45% (+/- 1.5%).

On a non-GAAP basis, FormFactor expects earnings of 31 cents (+/- 4 cents) per share.

How have estimates changed since then?

It turns out that the review of estimates has been trending upwards over the past month.

As a result of these changes, the consensus estimate moved by 76.19%.

VGM results

FormFactor currently has an average Growth Score of C, but its Momentum Score performs much better at A. However, the stock is rated F on the Value side, putting it in the bottom quintile of this investment strategy.

Overall, the stock has a Total VGM Score of D. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for the stock are trending upwards, and the scale of these revisions looks promising. Notably, FormFactor carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

FormFactor belongs to the Zacks Electronics – Semiconductors industry. Another stock in the same industry, Advanced Micro Devices (AMD), has gained 14.1% over the past month. More than a month has passed since the company announced its results for the quarter ended March 2024.

In the most recent quarter, Advanced Micro reported revenue of $5.47 billion, representing a year-over-year change of +2.2%. EPS of $0.62 for the same period compared to $0.60 a year ago.

For the current quarter, Advanced Micro is expected to report earnings per share of $0.67, representing a change of +15.5% from the prior-year quarter. The Zacks Consensus Estimate has changed -3.3% over the past 30 days.

Advanced Micro carries a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Rating of F.

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