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Analyst Blog

Synopsys Inc. (SNPS - Analyst Report) is set to report third quarter 2013 results on Aug 21, 2013. Last quarter, it posted 31.11% positive surprise with a trailing four-quarter average positive surprise of 40.76%. Let’s see how things are shaping up for this quarter.

Growth Factors this Past Quarter

Synopsys reported better-than-expected second-quarter results wherein both the top line and bottom line beat the Zacks Consensus Estimate. The top line was primarily impacted by higher license revenues and maintenance revenues. The company witnessed  volume increase across all its business segments. Moreover, higher margins positively impacted net earnings.

Earnings Whispers?   

The company’s recent product launches (Dolby MS11 Decoder, 28-nm Data Converter IP Portfolio) and deal wins (Fujitsu) are expected to positively impact results. Moreover, the unique intellectual properties provided by Synopsys with the help of its technology leadership and global support will likely drive its forthcoming results.

The Zacks Consensus Estimate for the third quarter stands at 34 cents while that for fiscal 2013 stands at $1.60. Neither of the estimates has been revised in the last 60 days.

The stock carries a Zacks Rank #3 (Hold).

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

We expect the following stocks to beat earnings estimates in the upcoming quarters given positive Expected Surprise Prediction or ESP (Read:  Zacks Earnings ESP: A Better Method) and a favorable Zacks Rank.

Donnelley , Earnings ESP of +2.5% and a Zacks Rank #1 (Strong Buy)

Hewlett-Packard Co. (HPQ - Analyst Report), Earnings ESP of +2.3% and a Zacks Rank #2 (Buy)

Portfolio Recovery Associates Inc. (PRAA - Analyst Report), Earnings ESP of +2.3% and a Zacks Rank #2 (Buy).

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