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Why Is Synopsys (SNPS) Up 6.1% 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 added about 6.1% 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’ fourth-quarter fiscal 2021 non-GAAP earnings of $1.82 per share beat the Zacks Consensus Estimate of $1.78 and improved 15.2% year over year.
Further, revenues surged 12.4% year over year to $1.15 billion, driven by growth across its business segments. Quarterly revenues met the Zacks Consensus Estimate.
Synopsys benefited from the increasing demand for its products amid the rapid adoption of Big Data, faster computation and Machine Learning. Also, complex, connected, specialized, and secure chips and systems are gaining strong momentum, driving Synopsys’ business.
Moreover, the robust adoption of SNPS’ Verification Continuum Platform and Fusion Compiler product within the Fusion Design Platform was a major growth driver during the fourth quarter.
Quarter in Detail
In the license-type revenue group, Time-Based Product revenues (60% of total revenues) of $688.1 million were up 13.4% year over year. Upfront Product revenues (24%) improved 12.3% to $274.3 million. Maintenance and Service revenues (16%) increased 8.8% year over year to $190 million from the year-ago quarter’s $174.7 million.
Segment-wise, Semiconductor & System Design revenues (91% of total revenues) were $1.04 billion, up 11.5% year over year. Within the segment, EDA (Electronic Design Automation) revenues (56% of revenues) were $617.2 million and IP & Systems Integration revenues (36% of revenues) came in at $420.6 million.
Software Integrity revenues totaled $110 million, contributing approximately 9% to the top line in the reported quarter.
Geographically, Synopsys’ revenues in North America (47% of the total) were $545.3 million and $116.3 million in Europe (10%). Revenues from Korea (10%), China (14%) and Other (19%) came in at $113.7 million, $157.3 million and $220 million, respectively.
Non-GAAP operating margin was 29.5%, expanding 30 basis points (bps) year over year. Semiconductor & System Design delivered an adjusted operating margin of 31.3%, shrinking 10 bps year over year, while Software Integrity margin expanded 530 bps year over year to 12.1%.
Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $1.58 billion as of Oct 31, 2021, compared with $1.53 billion as of Jul 31, 2021.
Total long-term debt came in at $25.1 million in the reported quarter, up from $24.8 million as of Jul 31.
Operating cash flow in the fourth quarter was $371 million. During fiscal 2021, Synopsys generated operating cash flow of $1.49 billion.
Guidance
For the first quarter of fiscal 2022, Synopsys expects revenues between $1.25 billion and $1.28 billion. Management estimates non-GAAP earnings between $2.35 and $2.40 per share. Non-GAAP expenses are anticipated in the band of $802-$812 million.
For fiscal 2022, management projects revenues of $4.19-$4.22 billion. Non-GAAP earnings for the fiscal year are expected between $7.73 and $7.80 per share. Non-GAAP expenses are projected in the range of $3.225-$3.255 billion. Also, Synopsys forecasts operating cash flow of $1.4-$1.5 billion.
Further, management anticipates strong demand for SNPS’ advanced solutions and cloud computing services along with the growing customer acceptance for its new capabilities to drive growth for its robust product portfolio.
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 37.69% 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. 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 6.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Synopsys (SNPS - Free Report) . Shares have added about 6.1% 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' Q4 Earnings Beat Estimates, Revenues Meet
Synopsys’ fourth-quarter fiscal 2021 non-GAAP earnings of $1.82 per share beat the Zacks Consensus Estimate of $1.78 and improved 15.2% year over year.
Further, revenues surged 12.4% year over year to $1.15 billion, driven by growth across its business segments. Quarterly revenues met the Zacks Consensus Estimate.
Synopsys benefited from the increasing demand for its products amid the rapid adoption of Big Data, faster computation and Machine Learning. Also, complex, connected, specialized, and secure chips and systems are gaining strong momentum, driving Synopsys’ business.
Moreover, the robust adoption of SNPS’ Verification Continuum Platform and Fusion Compiler product within the Fusion Design Platform was a major growth driver during the fourth quarter.
Quarter in Detail
In the license-type revenue group, Time-Based Product revenues (60% of total revenues) of $688.1 million were up 13.4% year over year. Upfront Product revenues (24%) improved 12.3% to $274.3 million. Maintenance and Service revenues (16%) increased 8.8% year over year to $190 million from the year-ago quarter’s $174.7 million.
Segment-wise, Semiconductor & System Design revenues (91% of total revenues) were $1.04 billion, up 11.5% year over year. Within the segment, EDA (Electronic Design Automation) revenues (56% of revenues) were $617.2 million and IP & Systems Integration revenues (36% of revenues) came in at $420.6 million.
Software Integrity revenues totaled $110 million, contributing approximately 9% to the top line in the reported quarter.
Geographically, Synopsys’ revenues in North America (47% of the total) were $545.3 million and $116.3 million in Europe (10%). Revenues from Korea (10%), China (14%) and Other (19%) came in at $113.7 million, $157.3 million and $220 million, respectively.
Non-GAAP operating margin was 29.5%, expanding 30 basis points (bps) year over year. Semiconductor & System Design delivered an adjusted operating margin of 31.3%, shrinking 10 bps year over year, while Software Integrity margin expanded 530 bps year over year to 12.1%.
Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $1.58 billion as of Oct 31, 2021, compared with $1.53 billion as of Jul 31, 2021.
Total long-term debt came in at $25.1 million in the reported quarter, up from $24.8 million as of Jul 31.
Operating cash flow in the fourth quarter was $371 million. During fiscal 2021, Synopsys generated operating cash flow of $1.49 billion.
Guidance
For the first quarter of fiscal 2022, Synopsys expects revenues between $1.25 billion and $1.28 billion. Management estimates non-GAAP earnings between $2.35 and $2.40 per share. Non-GAAP expenses are anticipated in the band of $802-$812 million.
For fiscal 2022, management projects revenues of $4.19-$4.22 billion. Non-GAAP earnings for the fiscal year are expected between $7.73 and $7.80 per share. Non-GAAP expenses are projected in the range of $3.225-$3.255 billion. Also, Synopsys forecasts operating cash flow of $1.4-$1.5 billion.
Further, management anticipates strong demand for SNPS’ advanced solutions and cloud computing services along with the growing customer acceptance for its new capabilities to drive growth for its robust product portfolio.
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 37.69% 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. Notably, Synopsys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.