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Here's Why Investors Need to Keep an Eye on Cadence (CDNS)
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Record Inflation, tough Fed policy, lingering supply chain issues and uncertainty prevailing over global macroeconomic conditions have raised investors’ apprehension. Amid the ongoing volatility, Cadence Design Systems (CDNS - Free Report) is a stock investors may consider adding to their portfolio to make some gains from its upside potential. The company currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Why is CDNS an Attractive Pick
Apart from having solid fundamentals, Cadence has the favorable combination of a Growth Score of A and a Zacks Rank #1. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 (Buy) and a Growth Score of A or B offer solid investment opportunities.
Cadence has an impressive earnings surprise history. The company outpaced estimates in all the trailing four quarters, delivering an average earnings surprise of 9.8%. The stock has an impressive long-term earnings per share (EPS) growth expectation of 17.7%.
The Zacks Consensus Estimate for 2022 earnings of $4.11 per share suggests growth of approximately 5.7% from the year-ago period’s levels. For 2023, the consensus mark for earnings is pegged at $4.52, indicating a year-over-year increase of 5.6%.
In the last reported quarter, Cadence posted non-GAAP earnings of $1.08 per share in second-quarter 2022, topping the Zacks Consensus Estimate by 11.3% and increasing 26% year over year. Revenues of $857.5 million surpassed the Zacks Consensus Estimate by 2.45% and increased 18% on a year-over-year basis. The top line benefited from continued strength across all segments driven by higher product demand. CDNS ended the quarter with a backlog of $5.6 billion.
Driven by strong second-quarter results, the company raised its outlook for 2022. The company raised its outlook for 2022. Revenues for the full year are now projected in the range of $3.47-$3.51 billion compared with the earlier guidance of $3.395-$3.435 billion. The Zacks Consensus Estimate for 2022 revenues is currently pegged at $3.5 billion, which indicates year-over-year growth of 17.1%.
Non-GAAP earnings for 2022 are expected in the range of $4.06-$4.12 per share compared with the earlier guidance of $3.89-$3.97 per share.
Shares of Cadence have gained 29.1% in the past year against the Zacks Computer-Software industry’s decline of 8%.
Image Source: Zacks Investment Research
Strong Fundamental Drivers
Based in San Jose, CA, Cadence offers products and tools that help customers to design electronic products. Cadence’s core electronic design automation (EDA) software and services enable engineers to develop different types of ICs. Its design IP’s are directly integrated into the ICs.
Cadence’s performance is being driven by strength across all segments owing to healthy demand for the company’s diversified product portfolio.
Deployment of 5G, increasing usage of hyperscale computing and emerging technologies like Artificial Intelligence and machine learning are fueling digital transformation across various end markets and boosting demand for advanced semiconductors chips.
Frequent product launches are expected to help the company sustain top-line growth. In 2021, Cadence introduced 13 new products, including Cadence Helium Virtual and Hybrid Studio and Allegro X. The company’s Palladium and Protium platform is gaining traction among clients in the hyperscale, AI/ML and server customers.
Apart from frequent product launches, synergies from acquisitions are expected to help the company sustain top-line growth.
Recently, Cadence announced an agreement to acquire OpenEye Scientific Software for about $500 million in cash. The acquisition aims to accelerate
Cadence’s Intelligent System Design strategy and expand its total addressable market. The company wants to expand its reach in the molecular modeling and simulation market as pharmaceutical and biotechnology companies leverage computational software solutions for drug discovery.
Prior to that, Cadence announced the acquisition of a simulation software company — Future Facilities — for an undisclosed sum. The addition of Future Facilities will aid Cadence in improving the company’s Fidelity CFD solution with digital twin solutions, including electronics cooling and energy management solutions.
Apart from the new acquisitions, synergies from the Integrand and AWR buyouts and the recent acquisitions of Pointwise and NUMECA are contributing to the top line.
Other Stocks to Consider
Some better-ranked stocks from the broader technology sector worth consideration are Arista Networks (ANET - Free Report) , Intuit (INTU - Free Report) and Badger Meter (BMI - Free Report) . Arista Networks and Badger Meter sport a Zacks Rank #1, while Intuit carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for BMI’s 2022 earnings is pegged at $2.30 per share, up 7% in the past 60 days. Badger Meter’s earnings beat the Zacks Consensus Estimate in three of the preceding four quarters, with the average being 12.6%. Shares of BMI have lost 1.6% of their value in the past year.
The Zacks Consensus Estimate for Arista Networks’ 2022 earnings is pegged at $3.99 per share, up 8.4% in the past 60 days. The long-term earnings growth rate is anticipated to be 18.6%.
ANET earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 10.1%. Shares of ANET have increased 41.2% in the past year.
The Zacks Consensus Estimate for Intuit’s fiscal 2022 earnings is pegged at $11.72 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 15.6%.
Intuit’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 16.8%. Shares of INTU have lost 8.7% in the past year.
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Here's Why Investors Need to Keep an Eye on Cadence (CDNS)
Record Inflation, tough Fed policy, lingering supply chain issues and uncertainty prevailing over global macroeconomic conditions have raised investors’ apprehension. Amid the ongoing volatility, Cadence Design Systems (CDNS - Free Report) is a stock investors may consider adding to their portfolio to make some gains from its upside potential. The company currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Why is CDNS an Attractive Pick
Apart from having solid fundamentals, Cadence has the favorable combination of a Growth Score of A and a Zacks Rank #1. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 (Buy) and a Growth Score of A or B offer solid investment opportunities.
Cadence Design Systems, Inc. Price
Cadence Design Systems, Inc. price | Cadence Design Systems, Inc. Quote
Cadence has an impressive earnings surprise history. The company outpaced estimates in all the trailing four quarters, delivering an average earnings surprise of 9.8%. The stock has an impressive long-term earnings per share (EPS) growth expectation of 17.7%.
The Zacks Consensus Estimate for 2022 earnings of $4.11 per share suggests growth of approximately 5.7% from the year-ago period’s levels. For 2023, the consensus mark for earnings is pegged at $4.52, indicating a year-over-year increase of 5.6%.
In the last reported quarter, Cadence posted non-GAAP earnings of $1.08 per share in second-quarter 2022, topping the Zacks Consensus Estimate by 11.3% and increasing 26% year over year. Revenues of $857.5 million surpassed the Zacks Consensus Estimate by 2.45% and increased 18% on a year-over-year basis. The top line benefited from continued strength across all segments driven by higher product demand. CDNS ended the quarter with a backlog of $5.6 billion.
Driven by strong second-quarter results, the company raised its outlook for 2022. The company raised its outlook for 2022. Revenues for the full year are now projected in the range of $3.47-$3.51 billion compared with the earlier guidance of $3.395-$3.435 billion. The Zacks Consensus Estimate for 2022 revenues is currently pegged at $3.5 billion, which indicates year-over-year growth of 17.1%.
Non-GAAP earnings for 2022 are expected in the range of $4.06-$4.12 per share compared with the earlier guidance of $3.89-$3.97 per share.
Shares of Cadence have gained 29.1% in the past year against the Zacks Computer-Software industry’s decline of 8%.
Image Source: Zacks Investment Research
Strong Fundamental Drivers
Based in San Jose, CA, Cadence offers products and tools that help customers to design electronic products. Cadence’s core electronic design automation (EDA) software and services enable engineers to develop different types of ICs. Its design IP’s are directly integrated into the ICs.
Cadence’s performance is being driven by strength across all segments owing to healthy demand for the company’s diversified product portfolio.
Deployment of 5G, increasing usage of hyperscale computing and emerging technologies like Artificial Intelligence and machine learning are fueling digital transformation across various end markets and boosting demand for advanced semiconductors chips.
Frequent product launches are expected to help the company sustain top-line growth. In 2021, Cadence introduced 13 new products, including Cadence Helium Virtual and Hybrid Studio and Allegro X. The company’s Palladium and Protium platform is gaining traction among clients in the hyperscale, AI/ML and server customers.
Apart from frequent product launches, synergies from acquisitions are expected to help the company sustain top-line growth.
Recently, Cadence announced an agreement to acquire OpenEye Scientific Software for about $500 million in cash. The acquisition aims to accelerate
Cadence’s Intelligent System Design strategy and expand its total addressable market. The company wants to expand its reach in the molecular modeling and simulation market as pharmaceutical and biotechnology companies leverage computational software solutions for drug discovery.
Prior to that, Cadence announced the acquisition of a simulation software company — Future Facilities — for an undisclosed sum. The addition of Future Facilities will aid Cadence in improving the company’s Fidelity CFD solution with digital twin solutions, including electronics cooling and energy management solutions.
Apart from the new acquisitions, synergies from the Integrand and AWR buyouts and the recent acquisitions of Pointwise and NUMECA are contributing to the top line.
Other Stocks to Consider
Some better-ranked stocks from the broader technology sector worth consideration are Arista Networks (ANET - Free Report) , Intuit (INTU - Free Report) and Badger Meter (BMI - Free Report) . Arista Networks and Badger Meter sport a Zacks Rank #1, while Intuit carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for BMI’s 2022 earnings is pegged at $2.30 per share, up 7% in the past 60 days. Badger Meter’s earnings beat the Zacks Consensus Estimate in three of the preceding four quarters, with the average being 12.6%. Shares of BMI have lost 1.6% of their value in the past year.
The Zacks Consensus Estimate for Arista Networks’ 2022 earnings is pegged at $3.99 per share, up 8.4% in the past 60 days. The long-term earnings growth rate is anticipated to be 18.6%.
ANET earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 10.1%. Shares of ANET have increased 41.2% in the past year.
The Zacks Consensus Estimate for Intuit’s fiscal 2022 earnings is pegged at $11.72 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 15.6%.
Intuit’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 16.8%. Shares of INTU have lost 8.7% in the past year.