What happened

In response to FormFactor's (NASDAQ:FORM) fourth-quarter results and forward guidance, shares in the equipment provider to the semiconductor industry fell as much as 14% in early-morning trading on Thursday. Shares have since recovered but were still down about 8% as of 12:15 p.m. EST.

So what

Here's a review of the headline numbers from FormFactor's fourth quarter:

  • Revenue grew 6.4% to $132 million. That was at the high end of management's guidance and also beat Wall Street's expectations.
  • Non-GAAP gross margin was 41.8% for the quarter, missing guidance. 
  • Non-GAAP EPS was $0.24. While this figure was within management's guidance range, it came up short of the $0.27 that analysts were expecting.

The quarterly results were accompanied by tepid guidance for the current quarter:

  • Revenue is expected to land between $112 million and $120 million. The midpoint of this range represents a 10% decline year over year. It is also below Wall Street's expectation of $120.6 million.
  • Non-GAAP EPS of $0.12 to $0.18 also represents a decline, of 37.5% at the midpoint. This range is well shy of the $0.20 that analysts were projecting.

The mixed quarterly results and unimpressive guidance are the likely reason shares are taking a step back today.

Woman in suit giving the thumbs-down

Image source: Getty Images.

Now what

On the company's investor call, CEO Mike Slessor explained the weak quarterly guidance was caused by an order delay from the company's largest customer, Intel (NASDAQ:INTC). However, he said he expects the company to send out record shipments to Intel in the second half of 2018.

In response to the slow demand, management has decided to temporarily scale back its manufacturing capacity to dampen the overall financial impact. Slessor said that capacity can be scaled up quickly once the demand returns.

This is the second quarter in a row that FormFactor's stock has fallen hard as a result of disappointing guidance. While I still think there are reasons to believe this company can return to long-term growth eventually, FormFactor's huge dependence on Intel's capital spending plans is a major risk that investors must consider before buying shares.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.