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Why Is Synopsys (SNPS) Down 1.4% Since Last Earnings Report?
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It has been about a month since the last earnings report for Synopsys (SNPS - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Synopsys due for a breakout? 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 Reports Solid Q3 Results
Synopsys third-quarter fiscal 2019 non-GAAP earnings of $1.18 per share beat the Zacks Consensus Estimate of $1.1 and also improved 24% year over year.
Further, revenues grew 9.4% year over year to $853 million and surpassed the Zacks Consensus Estimate of $829.5 million as well.
The company is benefiting from increasing global design activity and customer engagements. Rising impact of “AI, Automotive, 5G, IoT, Cloud and the proliferation of Smart Everything” is boosting demand for its advance solutions.
Despite the unpredictability surrounding the trade scenario in China and Huawei ban, which affected its revenues, the company raised its guidance for fiscal 2019.
Quarter in Detail
Time-Based Products revenues (63% of the total generated) came in at $537.6 million, down 5.7% year over year. However, Upfront Products revenues (21%) soared 78% to $177.6 million. Maintenance and Service revenues (16%) too grew 25% to $137.8 million.
Segment wise, Semiconductor & System Design revenues (90% of total) were $769.4 million. Solid customer demand coupled with the timing of customer pull downs for IP products was a positive. Within the segment, EDA revenues were $481.6 million and the same from IP & Systems Integration was $286.2 million
Strong momentum in Fusion Design Platform, launched last November, is a key driver. During the quarter, the company had several contract wins at leading semiconductor companies.
Synopsys is also gaining from more than 30% revenue growth in Custom Compiler, which is fuelled by key wins in the 5G, AI and server chip markets.
The company’s Verification Continuum platform steadily witnesses excellent demand and competitive wins. Large cloud hyperscalers in North America are contributing to robust growth in verification software. Robust momentum in interface IP coupled with memory and logic IP is driving its IP revenues. Cloud computing is also a major catalyst.
Software Integrity revenues were 83.6 million, accounting for approximately 10% of the total metric in the reported quarter. The launch of Polaris Software Integrity Platform is a tailwind.
Geographically, Synopsys’ revenues in North America (49% of total) were $414 million while Revenues in Europe (11%) were $90.1 million. Asia Pacific revenues (33%) were $283.2 million whereas revenues in Japan (8%) were $65.7 million.
Margins
Per ASC 606, non-GAAP operating margin was 25.4%. While Semiconductor & System Design delivered an adjusted operating margin of 27%, that of Software Integrity came in at 10.5%.
Balance Sheet & Cash Flow
Synopsys exited the fiscal third quarter with cash and cash equivalents of $686.8 million compared with $631.2 million at the end of the previous reported quarter.
During the quarter, the company generated $370 million of cash from operational activities compared with $353 million sequentially.
The company implemented a $100-million share buyback, thus bringing the total so far this year to $229 million.
Guidance
For the fiscal fourth quarter, the company’s revenues are likely to be in the $830-$860 million band. Non-GAAP expenses are anticipated within $630-$650 million. Management assumes non-GAAP earnings per share of $1.10-$1.15.
The company upped its guidance for fiscal 2019. Revenues are now projected in the range of $3.34-$3.37 billion compared with $3.29-$3.35 predicted earlier. Non-GAAP earnings per share for fiscal 2019 are forecast between $4.52 and $4.57, up from $4.24-$4.40 envisioned earlier.
Double-digit growth in non-GAAP earnings is expected to be driven by revenue rise in high-single-digits, reflecting growth in mid-to-high single digits for EDA, low-double-digits for IP and strength in Software Integrity growth within the 20% range. The company estimates to boost its operating margin in the high-20s by 2021 and in the long haul, within the 30% range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 13.62% due to these changes.
VGM Scores
Currently, Synopsys has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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 #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Synopsys (SNPS) Down 1.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Synopsys (SNPS - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Synopsys due for a breakout? 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 Reports Solid Q3 Results
Synopsys third-quarter fiscal 2019 non-GAAP earnings of $1.18 per share beat the Zacks Consensus Estimate of $1.1 and also improved 24% year over year.
Further, revenues grew 9.4% year over year to $853 million and surpassed the Zacks Consensus Estimate of $829.5 million as well.
The company is benefiting from increasing global design activity and customer engagements. Rising impact of “AI, Automotive, 5G, IoT, Cloud and the proliferation of Smart Everything” is boosting demand for its advance solutions.
Despite the unpredictability surrounding the trade scenario in China and Huawei ban, which affected its revenues, the company raised its guidance for fiscal 2019.
Quarter in Detail
Time-Based Products revenues (63% of the total generated) came in at $537.6 million, down 5.7% year over year. However, Upfront Products revenues (21%) soared 78% to $177.6 million. Maintenance and Service revenues (16%) too grew 25% to $137.8 million.
Segment wise, Semiconductor & System Design revenues (90% of total) were $769.4 million. Solid customer demand coupled with the timing of customer pull downs for IP products was a positive. Within the segment, EDA revenues were $481.6 million and the same from IP & Systems Integration was $286.2 million
Strong momentum in Fusion Design Platform, launched last November, is a key driver. During the quarter, the company had several contract wins at leading semiconductor companies.
Synopsys is also gaining from more than 30% revenue growth in Custom Compiler, which is fuelled by key wins in the 5G, AI and server chip markets.
The company’s Verification Continuum platform steadily witnesses excellent demand and competitive wins. Large cloud hyperscalers in North America are contributing to robust growth in verification software. Robust momentum in interface IP coupled with memory and logic IP is driving its IP revenues. Cloud computing is also a major catalyst.
Software Integrity revenues were 83.6 million, accounting for approximately 10% of the total metric in the reported quarter. The launch of Polaris Software Integrity Platform is a tailwind.
Geographically, Synopsys’ revenues in North America (49% of total) were $414 million while Revenues in Europe (11%) were $90.1 million. Asia Pacific revenues (33%) were $283.2 million whereas revenues in Japan (8%) were $65.7 million.
Margins
Per ASC 606, non-GAAP operating margin was 25.4%. While Semiconductor & System Design delivered an adjusted operating margin of 27%, that of Software Integrity came in at 10.5%.
Balance Sheet & Cash Flow
Synopsys exited the fiscal third quarter with cash and cash equivalents of $686.8 million compared with $631.2 million at the end of the previous reported quarter.
During the quarter, the company generated $370 million of cash from operational activities compared with $353 million sequentially.
The company implemented a $100-million share buyback, thus bringing the total so far this year to $229 million.
Guidance
For the fiscal fourth quarter, the company’s revenues are likely to be in the $830-$860 million band. Non-GAAP expenses are anticipated within $630-$650 million. Management assumes non-GAAP earnings per share of $1.10-$1.15.
The company upped its guidance for fiscal 2019. Revenues are now projected in the range of $3.34-$3.37 billion compared with $3.29-$3.35 predicted earlier. Non-GAAP earnings per share for fiscal 2019 are forecast between $4.52 and $4.57, up from $4.24-$4.40 envisioned earlier.
Double-digit growth in non-GAAP earnings is expected to be driven by revenue rise in high-single-digits, reflecting growth in mid-to-high single digits for EDA, low-double-digits for IP and strength in Software Integrity growth within the 20% range. The company estimates to boost its operating margin in the high-20s by 2021 and in the long haul, within the 30% range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 13.62% due to these changes.
VGM Scores
Currently, Synopsys has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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 #2 (Buy). We expect an above average return from the stock in the next few months.