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Synopsys (SNPS) Up 9.9% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Synopsys (SNPS - Free Report) . Shares have added about 9.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Synopsys due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Synopsys Q2 Earnings and Sales Surpass Estimates
Synopsys reported second-quarter fiscal 2023 non-GAAP earnings of $2.54 per share, beating the Zacks Consensus Estimate of $2.47. The bottom line improved 1.6% year over year.
Revenues jumped 9.1% year over year to $1.4 billion, driven by growth across its business segments. The top line surpassed the Zacks Consensus Estimate of $1.38 billion by 1.1%.
Synopsys benefited from the increasing demand for its products amid the rapid adoption of Big Data, faster computation and Machine Learning. Complex, connected, specialized and secure chips and systems witnessed strong momentum and drove Synopsys’ quarterly performance.
Quarter in Detail
In the license-type revenues group, Time-Based Product revenues (57.9% of total revenues) of $808.2 million were up 11.7% year over year. Upfront Product revenues (24.8%) moved upward by 2.6% to $345.5 million. Maintenance and Service revenues (17.3%) increased 10.2% to $241.1 million from the year-ago quarter’s $218.8 million.
Segment-wise, Electronic Design Automation (EDA) revenues (64.6% of revenues) were $900.8 million, up 14.5% year over year. Design Intellectual Property (IP) revenues (24% of revenues) amounted to $335.2 million while Software Integrity revenues totaled $132.1 million, contributing approximately 9.5% to the top line in the reported quarter.
Other revenues were $26.7 million, representing 1.9% of total revenues.
Geographically, Synopsys’ revenues in North America (48% of the total) and Europe (11%) were $668.2 million and $157 million, respectively. Revenues from Korea (11%), China (14%) and Other (16%) were $156.8 million, $196.4 million and $216.4 million, respectively.
The non-GAAP operating margin was 33.3%, contracting 350 basis points (bps) year over year.
Software Integrity delivered adjusted operating margin of 13.9%, expanding 240 bps on a year-over-year basis. On the contrary, EDA and Design IP margin contracted 50 bps and 1310 bps year over year to 38.8% and 25.8%, respectively.
Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $1.7 billion as of Apr 30, 2023 compared with $1.30 billion as of Jan 31, 2023.
Total long-term debt was $20.2 million in the reported quarter, slightly down from $20.6 million as of Jan 31, 2023.
During second-quarter fiscal 2023, operating cash flow was $703 million.
Guidance
For the third quarter of fiscal 2023, Synopsys expects revenues between $1.465 billion and $1.495 billion. Management estimates non-GAAP earnings between $2.70 per share and $2.75 per share. Non-GAAP expenses are anticipated in the band of $970-$980 million.
For fiscal 2023, SNPS expects revenues in the $5.790-$5.830 billion range, suggesting 14-15% growth. Non-GAAP earnings are estimated in the $10.77-$10.84 per share range.
Non-GAAP expenses are likely to be in the range of $3.790-$3.820 billion. Synopsys previously predicted an operating cash flow of approximately $1.650 billion for fiscal 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, Synopsys 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 F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Synopsys has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Synopsys belongs to the Zacks Computer - Software industry. Another stock from the same industry, Ansys (ANSS - Free Report) , has gained 9.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Ansys reported revenues of $496.6 million in the last reported quarter, representing a year-over-year change of +4.4%. EPS of $1.60 for the same period compares with $1.77 a year ago.
For the current quarter, Ansys is expected to post earnings of $1.26 per share, indicating a change of -28.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.1% over the last 30 days.
Ansys has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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Synopsys (SNPS) Up 9.9% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Synopsys (SNPS - Free Report) . Shares have added about 9.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Synopsys due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Synopsys Q2 Earnings and Sales Surpass Estimates
Synopsys reported second-quarter fiscal 2023 non-GAAP earnings of $2.54 per share, beating the Zacks Consensus Estimate of $2.47. The bottom line improved 1.6% year over year.
Revenues jumped 9.1% year over year to $1.4 billion, driven by growth across its business segments. The top line surpassed the Zacks Consensus Estimate of $1.38 billion by 1.1%.
Synopsys benefited from the increasing demand for its products amid the rapid adoption of Big Data, faster computation and Machine Learning. Complex, connected, specialized and secure chips and systems witnessed strong momentum and drove Synopsys’ quarterly performance.
Quarter in Detail
In the license-type revenues group, Time-Based Product revenues (57.9% of total revenues) of $808.2 million were up 11.7% year over year. Upfront Product revenues (24.8%) moved upward by 2.6% to $345.5 million. Maintenance and Service revenues (17.3%) increased 10.2% to $241.1 million from the year-ago quarter’s $218.8 million.
Segment-wise, Electronic Design Automation (EDA) revenues (64.6% of revenues) were $900.8 million, up 14.5% year over year. Design Intellectual Property (IP) revenues (24% of revenues) amounted to $335.2 million while Software Integrity revenues totaled $132.1 million, contributing approximately 9.5% to the top line in the reported quarter.
Other revenues were $26.7 million, representing 1.9% of total revenues.
Geographically, Synopsys’ revenues in North America (48% of the total) and Europe (11%) were $668.2 million and $157 million, respectively. Revenues from Korea (11%), China (14%) and Other (16%) were $156.8 million, $196.4 million and $216.4 million, respectively.
The non-GAAP operating margin was 33.3%, contracting 350 basis points (bps) year over year.
Software Integrity delivered adjusted operating margin of 13.9%, expanding 240 bps on a year-over-year basis. On the contrary, EDA and Design IP margin contracted 50 bps and 1310 bps year over year to 38.8% and 25.8%, respectively.
Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $1.7 billion as of Apr 30, 2023 compared with $1.30 billion as of Jan 31, 2023.
Total long-term debt was $20.2 million in the reported quarter, slightly down from $20.6 million as of Jan 31, 2023.
During second-quarter fiscal 2023, operating cash flow was $703 million.
Guidance
For the third quarter of fiscal 2023, Synopsys expects revenues between $1.465 billion and $1.495 billion. Management estimates non-GAAP earnings between $2.70 per share and $2.75 per share. Non-GAAP expenses are anticipated in the band of $970-$980 million.
For fiscal 2023, SNPS expects revenues in the $5.790-$5.830 billion range, suggesting 14-15% growth. Non-GAAP earnings are estimated in the $10.77-$10.84 per share range.
Non-GAAP expenses are likely to be in the range of $3.790-$3.820 billion. Synopsys previously predicted an operating cash flow of approximately $1.650 billion for fiscal 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, Synopsys 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 F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Synopsys has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Synopsys belongs to the Zacks Computer - Software industry. Another stock from the same industry, Ansys (ANSS - Free Report) , has gained 9.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Ansys reported revenues of $496.6 million in the last reported quarter, representing a year-over-year change of +4.4%. EPS of $1.60 for the same period compares with $1.77 a year ago.
For the current quarter, Ansys is expected to post earnings of $1.26 per share, indicating a change of -28.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.1% over the last 30 days.
Ansys has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.