What happened

Shares of semiconductor equipment supplier Cohu (NASDAQ:COHU) sank on Friday after the company reported its first-quarter results. Despite beating analyst estimates across the board and providing solid guidance, the stock was down 12.6% by 12:16 p.m. EDT.

So what

Cohu reported first-quarter revenue of $81.1 million, up 23.3% year over year and nearly $3 million above the average analyst estimate. Cohu CEO Luis Muller pointed to record system shipments from the company's Malaysia operation, strong demand for turret and pick-and-place handlers, and multiple contractor design wins as the key drivers behind the company's strong performance.

The Cohu logo.

Image source: Cohu Inc.

Non-GAAP EPS came in at $0.35, up from $0.06 in the prior-year period and $0.11 better than analysts were expecting. GAAP gross margin surged to 39.8%, up from 29.3% during the first quarter of 2016, while operating expenses increased at a slower rate than revenue. This margin expansion combined with robust revenue growth drove the bottom line higher.

Cohu expects to produce $86 million of revenue during the second quarter, up from $76 million during the prior-year period. The company also approved a $0.06 quarterly dividend.

Now what

Cohu's first-quarter results were positive and its guidance called for continued revenue growth, but the stock sold off regardless. Valuation may be the issue, with the stock up considerably year to date. Shares of Cohu had surged more than 50% since the start of the year prior to the post-earnings sell-off. Expectations may have gotten ahead of what the company could realistically deliver, prompting the decline despite positive news.

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