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Synopsys (SNPS) to Post Q3 Earnings: What's in the Offing?

Zacks Equity Research

Synopsys, Inc. SNPS is slated to release third-quarter fiscal 2019 results on Aug 21.

Notably, the company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and matched it once, the average beat being 5.26%.

In the last reported quarter, both the bottom and top-line figures exceeded the Zacks Consensus Estimate and also marked a year-over-year improvement.

For the fiscal third quarter, the company estimates revenues in the $810-$850 million band. The Zacks Consensus Estimate for the metric is pegged at $829.5 million, indicating growth of 6.4% from the year-ago reported figure.

Management expects non-GAAP earnings per share within $1.07-$1.12. The Zacks Consensus Estimate for the same stands at $1.1, implying a rise of 15.8% from the prior-year reported number.

Synopsys, Inc. Price and EPS Surprise

Synopsys, Inc. Price and EPS Surprise

Synopsys, Inc. price-eps-surprise | Synopsys, Inc. Quote

Let’s see, how things are shaping up for this announcement.

Factors at Play

Synopsys’ results in the fiscal third quarter are likely to benefit from the growing adoption of its strong product portfolio. Robust trends in the core electronic design automation (EDA) market, driven by a consistent chip and system complexity, are a positive.

Growing demand for advanced technology, design, IP and security solutions is creating a solid market opportunity for the company. Rising impact of AI, 5G, IoT and big data is also boosting investments in new compute and machine-learning architectures, which will likely remain a tailwind.

Notably, the Fusion Design Platform, launched last November, is witnessing high demand. This, in turn, is likely to help generate strong results in the quarter under review.

Moreover, the company’s Verification Continuum platform, which steadily witnesses excellent demand and competitive wins, is anticipated to be a key driver.

Further, ZeBu Server 4 product is generating a broad-based adoption by customers’ designing storage, networking and AI chips. This is expected to boost results in the soon-to-be-reported quarter.

However, geo-political challenges coupled with ambiguities hovering around government actions to restrict trade with Huawei are a concern.

As a result of the trade ban, management mentioned on the last earnings call that the company is unable to book new business and the recognition of currently contracted revenues is also on hold. This makes us further apprehensive about Synopsys’ upcoming quarterly results.

Additionally, a rising competition from the likes of Cadence Design Systems Inc. CDNS is a woe.

What the Model Says

The proven Zacks model conclusively shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has significantly maximum chances of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Synopsys currently has a Zacks Rank of 4 and an Earnings ESP of 0.00%, which together makes surprise prediction difficult for the stock this reporting cycle.

Stocks to Consider

Following are a few stocks worth considering from the same space with the right mix of elements to beat estimates this earnings season:

The Cooper Companies, Inc. COO has an Earnings ESP of +1.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ciena Corporation CIEN has an Earnings ESP of +5.26% and a Zacks Rank #3.

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Synopsys, Inc. (SNPS) : Free Stock Analysis Report
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