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Why Is Synopsys (SNPS) Up 4.1% Since Last Earnings Report?
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A month has gone by since the last earnings report for Synopsys (SNPS - Free Report) . Shares have added about 4.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Synopsys Q2 Earnings and Revenues Miss Estimates
Synopsys missed both revenue and earnings estimates in the second quarter of 2024. The company’s second-quarter non-GAAP earnings per share (EPS) of $3 marginally lagged the Zacks Consensus Estimate of $3.03. However, the bottom line improved 26% year over year, primarily driven by higher revenues and better cost management.
Revenues jumped 15% year over year to $1.45 billion but missed the Zacks Consensus Estimate of $1.51 billion. The top line was driven by growth across multiple business segments.
Synopsys' revenue growth was driven by ongoing investments from semiconductor and systems companies in its solutions to enhance their R&D capabilities, leading to four new customer acquisitions and more than 50 repeat customer engagements.
Quarter in Detail
The software integrity segment of the company has gone under a definitive agreement to be acquired by Clearlake Capital and Francisco Partners. The $2.1 billion deal is supposed to be closed by the second half of 2024. The company has presented the Software Integrity business as a discontinued operation in its consolidated financial statements for all periods, resulting in changes in figures in the previous quarters. The report has been constructed per the new data.
In the license-type revenue group, Time-Based Product revenues (53.7% of the total revenues) of $781.7 million were up by 8.9% year over year. Upfront Product revenues (27.2%) moved upward by 18.3% to $396.4 million. Maintenance and Service revenues (19%) increased 31.8% to $276.6 million from the year-ago quarter’s $209.9 million.
Segment-wise, Electronic Design Automation (“EDA”) revenues (69.3% of revenues) were $1.01 billion, up 3.8% year over year. Design IP revenues (27.5% of revenues) amounted to $399.8 million. Other revenues were $47.3 million, representing 3.2% of the total revenues.
Geographically, Synopsys’ revenues in North America (44% of the total) and Europe (10%) were $638.2 million and $147.5 million, respectively. Revenues from Korea (13%), China (15%) and Other (17%) were $192.7 million, $221.8 million and $254.5 million, respectively.
The non-GAAP operating margin was 37.3%, expanding 290 basis points (bps) year over year.
Synopsys’ EDA’s adjusted operating margin rose 150 bps to 39.6%. The Design IP segment’s margin showed a massive improvement to 31.2% from 24.3% in the year-ago quarter.
Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $1.66 billion as of Apr 30, 2023 compared with $1.27 billion as of Jan 31, 2024.
The total long-term debt was $17 million at the end of the reported quarter, which remained approximately the same in comparison to the Jan 31 ending quarter.
The company’s cash flows from operating activities, including discontinued operations, was $477 million in the second quarter compared with the year-ago quarter’s cash flow generation of $703 million.
Guidance Update
For fiscal 2024, SNPS now expects revenues between $6.09 billion and $ 6.15 billion in comparison to the previously announced guidance range of $6.57-$6.63 billion. Non-GAAP earnings have been revised to $12.9-$12.98 from the previous guidance range of $13.47-$13.55 per share. Non-GAAP expenses are now expected in the range of $3.77 billion-$3.81 billion from the previously announced guidance range of $4.14-$4.18 billion.
For the third quarter of fiscal 2024, Synopsys expects revenues between $1.51 billion and $1.54 billion. Management estimates non-GAAP EPS between $3.25 and $3.30. Non-GAAP expenses are anticipated in the band of $920-$930 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Synopsys has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Synopsys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Synopsys (SNPS) Up 4.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Synopsys (SNPS - Free Report) . Shares have added about 4.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Synopsys Q2 Earnings and Revenues Miss Estimates
Synopsys missed both revenue and earnings estimates in the second quarter of 2024. The company’s second-quarter non-GAAP earnings per share (EPS) of $3 marginally lagged the Zacks Consensus Estimate of $3.03. However, the bottom line improved 26% year over year, primarily driven by higher revenues and better cost management.
Revenues jumped 15% year over year to $1.45 billion but missed the Zacks Consensus Estimate of $1.51 billion. The top line was driven by growth across multiple business segments.
Synopsys' revenue growth was driven by ongoing investments from semiconductor and systems companies in its solutions to enhance their R&D capabilities, leading to four new customer acquisitions and more than 50 repeat customer engagements.
Quarter in Detail
The software integrity segment of the company has gone under a definitive agreement to be acquired by Clearlake Capital and Francisco Partners. The $2.1 billion deal is supposed to be closed by the second half of 2024. The company has presented the Software Integrity business as a discontinued operation in its consolidated financial statements for all periods, resulting in changes in figures in the previous quarters. The report has been constructed per the new data.
In the license-type revenue group, Time-Based Product revenues (53.7% of the total revenues) of $781.7 million were up by 8.9% year over year. Upfront Product revenues (27.2%) moved upward by 18.3% to $396.4 million. Maintenance and Service revenues (19%) increased 31.8% to $276.6 million from the year-ago quarter’s $209.9 million.
Segment-wise, Electronic Design Automation (“EDA”) revenues (69.3% of revenues) were $1.01 billion, up 3.8% year over year. Design IP revenues (27.5% of revenues) amounted to $399.8 million. Other revenues were $47.3 million, representing 3.2% of the total revenues.
Geographically, Synopsys’ revenues in North America (44% of the total) and Europe (10%) were $638.2 million and $147.5 million, respectively. Revenues from Korea (13%), China (15%) and Other (17%) were $192.7 million, $221.8 million and $254.5 million, respectively.
The non-GAAP operating margin was 37.3%, expanding 290 basis points (bps) year over year.
Synopsys’ EDA’s adjusted operating margin rose 150 bps to 39.6%. The Design IP segment’s margin showed a massive improvement to 31.2% from 24.3% in the year-ago quarter.
Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $1.66 billion as of Apr 30, 2023 compared with $1.27 billion as of Jan 31, 2024.
The total long-term debt was $17 million at the end of the reported quarter, which remained approximately the same in comparison to the Jan 31 ending quarter.
The company’s cash flows from operating activities, including discontinued operations, was $477 million in the second quarter compared with the year-ago quarter’s cash flow generation of $703 million.
Guidance Update
For fiscal 2024, SNPS now expects revenues between $6.09 billion and $ 6.15 billion in comparison to the previously announced guidance range of $6.57-$6.63 billion. Non-GAAP earnings have been revised to $12.9-$12.98 from the previous guidance range of $13.47-$13.55 per share. Non-GAAP expenses are now expected in the range of $3.77 billion-$3.81 billion from the previously announced guidance range of $4.14-$4.18 billion.
For the third quarter of fiscal 2024, Synopsys expects revenues between $1.51 billion and $1.54 billion. Management estimates non-GAAP EPS between $3.25 and $3.30. Non-GAAP expenses are anticipated in the band of $920-$930 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Synopsys has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Synopsys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.