FormFactor's (FORM) Shares Rise 10.7% on Strong Q4 Outlook

FormFactor Inc. FORM has revised expectations for revenues, gross margins and earnings per share for the fourth quarter of 2019.

The company provided strong growth outlook on strong demand environment.

Investors seem overwhelmed with the announcement as FormFactor’s share price increased more than 10% in yesterday’s trading session, reaching a high of $23.77 and eventually closing at $23.75.

Also, shares of FormFactor have increased 68.5% compared with the industry’s 39.1% rally year to date.

 

 

Q4 Guidance Update

FormFactor now expects sales within $170-$178 million, up from the $145-$155 million range expected earlier. The Zacks Consensus Estimate for revenues is currently pegged at $150 million.

Management stated that strength in Foundry and Logic remains a major positive for the quarter. Foundry and Logic customers are ramping both new designs and nodes, which should expand the company’s top-line growth. Also, it has been witnessing robust demand for other businesses.

On a non-GAAP basis, the company revised its gross margin guidance to 43-46% from 42-46% and earnings per share to the range of 27-35 cents from 22-30 cents. The Zacks Consensus Estimate for earnings per share is pegged at 26 cents.

FormFactor, Inc. Price and Consensus

 

FormFactor, Inc. Price and Consensus

FormFactor, Inc. price-consensus-chart | FormFactor, Inc. Quote

Bottom Line

FormFactor is an original equipment manufacturer of wafer probe cards used by semiconductor makers. The company continues to ride on overall steady demand and efficient execution of strategies. Growing probe card demand in both Foundry and Logic markets remains a major positive. Further, its increasing focus on Mobile SoC and Mobile DRAM probe card segments continues to be a tailwind.

Additionally, FormFactor remains optimistic about strong relationships with semiconductor companies, backed by the ability to serve their electrical test and measurement requirements.

However, sluggish demand for DRAM and Flash product lines remains a woe. Additionally, adverse effects of extreme pricing pressure in the semiconductor industry and long lead times remain major concerns.

Zacks Rank & Other Stocks to Consider

Currently, Formfactor carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include MACOM Technology Solutions Holdings, Inc. MTSI, Itron, Inc. ITRI and AMETEK, Inc. AME, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for MACOM Technology, Itron and AMETEK is currently projected at 15%, 25% and 10.9%, respectively.

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