Factors Setting the Tone for Cadence (CDNS) in Q3 Earnings

Cadence Design Systems Inc. CDNS is set to report third-quarter 2018 results on Oct 22. Notably, the company has surpassed the Zacks Consensus Estimate in three of the trailing four quarters while coming in line in the remaining one, recording an average beat of 5.2%.

In the second quarter, earnings came in at 45 cents per share, surpassing the Zacks Consensus Estimate by a nickel. Management had predicted earnings between 39 cents and 41 cents.

Under ASC 606, the company delivered revenues of $518.4 million beating the Zacks Consensus Estimate of $515 million. The top line was near the high end of management’s expectation of $510-$520 million.

Under the old accounting standard, revenues increased 7.5% year over year to $515.1 million. Robust adoption of the company’s digital and signoff, custom and analog, IP solutions and an ever expanding customer base drove year-over-year growth.

Cadence reported Product & Maintenance revenues of $487.9 million which accounted for 94.1% of total revenues in the second quarter. Meanwhile, Services revenues of $30.5 million contributed 5.9% to total revenues.

What to Expect?

For third-quarter 2018, Cadence expects total revenues under ASC 606 in the range of $510-$520 million and non-GAAP earnings in the range of 40-42 cents per share.

The Zacks Consensus Estimate for earnings is pegged at 41 cents per share indicating an increase of 17.1% on a year-over-year basis.

Revenues are estimated to be approximately $518 million, indicating a rise of around 6.7% from the year-ago quarter.

For third-quarter 2018, the Zacks Consensus Estimate for Product & Maintenance revenues is pegged at $487 million, while Services revenues are pegged at $31.5 million.

Factors At Play

Cadence is focusing on providing end-to-end solutions, which rapidly reduces the time required to introduce a semiconductor product in the market. In this regard, the company's frequent product launches and enhancements bode well.

The company entered into a partnership with ArcSoft in a bid to add imaging intelligence AI technology and vision applications to its Tensilica Vision DSPs.

With Cadence Cloud, the company aims to offer a comprehensive cloud portfolio enabling the development of semiconductors and other electronic systems. The company has collaborated with Microsoft’s MSFT Azure, Amazon’s AMZN Amazon Web Services (“AWS”) and Google Cloud platform to enable smooth design development of electronic systems and semiconductors.

Furthermore, the company’s Cloud-Hosted Design Solution achieved Industrial Software Competency status from AWS in the to-be-reported quarter.

Cadence Design Systems, Inc. Price and EPS Surprise

 

Cadence Design Systems, Inc. Price and EPS Surprise | Cadence Design Systems, Inc. Quote

Notably, the Legato Reliability Solution is being leveraged by Infineon to accelerate simulation significantly. Further, Cadence’s DDR5 test chip achieved 4400 mega transfers per second data rate in Taiwan Semiconductor Manufacturing Company’s TSM 7nm process.

The company’s Cadence Tensilica DNA 100 Processor IP offers both high performance and power efficiency across a full range of compute from 0.5 TeraMAC (“TMAC”) to 100s of TMACs.

The company’s Palladium Z1 Enterprise Emulation Platform was selected by Taiwan-based Global Unichip Corporation (“GUC”). The platform will aid GUC to accelerate its system-on-chip (“SoC”) design processes.

We believe the innovative cloud-ready solutions broaden the company’s portfolio in an effective manner. The significant number of customer wins, strong collaborations and other repeat orders are expected to bolster the top line. Significant demand from aerospace and defense sectors remains a tailwind.

Zacks Rank

Cadence carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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