A month has gone by since the last earnings report for FormFactor (FORM). Shares have added about 3.5% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

FormFactor Q3 Earnings Beat Estimates, Revenue Up Y/Y

FormFactor delivered third-quarter 2024 adjusted earnings of 35 cents per share, beating the Zacks Consensus Estimate by 12.90%. The figure jumped 59.1% year over year.

FormFactor’s Segmental Details

Revenues of $207.9 million beat the Zacks Consensus Estimate by 3.7% and increased 21.2% year over year. Top-line growth was driven by continued strength in the DRAM probe-card business, which increased 118.9% year over year.

Probe card revenues were $172.2 million, up 34.1% year over year.

Foundry & Logic revenues (accounting for 51.7% of the total revenues) were $107.5 million, up 11.5% year over year.

DRAM revenues (29% of revenues) were $60.2 million, up 118.9% year over year. Strong DDR5 demand drove a third consecutive record-setting quarter for DRAM probe-card revenues. The company expects continued growth in DRAM probe-card revenues in the fourth quarter.

Flash revenues (2.2% of the total revenues) were $4.5 million. The reported figure was unchanged year over year.

Systems revenues (17.2% of the total revenues) were $35.7 million, down 17.4% year over year.

Revenues generated from the United States, Taiwan, South Korea, China, Japan, Singapore, and the rest of the world increased 25.9%, 11.4%, 18.8%, 58.3%, 15.7%, 48.6% and 5%, respectively, year over year.

Revenues generated from Europe and Malaysia declined 16.1% and 11.7%, respectively, year over year.

FORM’s Operating Results

In the third quarter of 2024, the gross margin increased 40 basis points (bps) year over year to 42.2%.

Non-GAAP operating expenses increased 8.9% year over year to $59.3 million. As a percentage of revenues, operating expenses were down 320 bps year over year to 28.5%.

The non-GAAP operating margin expanded 360 bps year over year to 13.6%.

FormFactor’s Balance Sheet & Cash Flow

As of Sept. 28, 2024, cash and cash equivalents, and marketable securities were $354.5 million compared with $357.6 million as of June 29, 2024.

Cash generated from operating activities was $26.7 million in the reported quarter, up from $22 million in the previous quarter.

The free cash flow was $20 million in the reported quarter compared with $14.2 million in the previous quarter. This increase was led by higher non-cash expenses of $2.4 million and a $3.1 million reduction in working capital outflows, partially offset by a $ 0.5 million rise in capital expenditure.

FORM’s Q4 Guidance

FormFactor expects fourth-quarter 2024 revenues of $190 million (+/- $5 million). The Zacks Consensus Estimate is pegged at $189.29 million, indicating 12.57% growth from the figure reported in the year-ago quarter.

The company expects a non-GAAP gross margin of 41% (+/- 1.5%).

On a non-GAAP basis, FORM expects earnings of 29 cents (+/- 4 cents) per share. The Zacks Consensus Estimate is pegged at 31 cents per share, indicating 55% growth from the figure reported in the year-ago quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -7.56% due to these changes.

VGM Scores

At this time, FormFactor has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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 is part of the Zacks Electronics - Semiconductors industry. Over the past month, Amkor Technology (AMKR), a stock from the same industry, has gained 2.2%. The company reported its results for the quarter ended September 2024 more than a month ago.

Amkor Technology reported revenues of $1.86 billion in the last reported quarter, representing a year-over-year change of +2.2%. EPS of $0.49 for the same period compares with $0.54 a year ago.

For the current quarter, Amkor Technology is expected to post earnings of $0.41 per share, indicating a change of -14.6% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Amkor Technology. Also, the stock has a VGM Score of B.

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