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Why Is Synopsys (SNPS) Up 3.7% Since Last Earnings Report?
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A month has gone by since the last earnings report for Synopsys (SNPS - Free Report) . Shares have added about 3.7% 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 the most recent earnings report in order to get a better handle on the important drivers.
Synopsys' Q1 Earnings and Revenues Beat Estimates
Synopsys reported first-quarter fiscal 2022 non-GAAP earnings of $2.40 per share, beating the Zacks Consensus Estimate of $2.37, reflecting an improvement of 57.9% year over year.
Revenues surged 30.9% year over year to $1.27 billion, driven by growth across its business segments. The top line narrowly beat the Zacks Consensus Estimate of $1.26 billion.
Synopsys benefited from the increasing demand for its products amid the rapid adoption of Big Data, faster computation and Machine Learning. Complex, connected, specialized, and secure chips and systems witnessed strong momentum and drove Synopsys’ quarterly performance.
Quarter in Detail
In the license-type revenue group, Time-Based Product revenues (55.7% of total revenues) of $707.5 million were up 12.1% year over year. Upfront Product revenues (29%) soared 111.2% to $368.3 million. Maintenance and Service revenues (15.3%) increased 18.1% year over year to $194.5 million from the year-ago quarter’s $164.7 million.
Segment-wise, Semiconductor & System Design revenues (91.5% of total revenues) were $1.16 billion, up 32.4% year over year. Within the segment, Electronic Design Automation revenues (50% of revenues) were $632.3 million, while IP & Systems Integration revenues (42% of revenues) came in at $527.5 million.
Software Integrity revenues totaled $107.6 million, contributing approximately 8.5% to the top line in the reported quarter.
Geographically, Synopsys’ revenues in North America (49% of the total) and Europe (10%) were $618 million and $132.7 million, respectively. Revenues from Korea (9%), China (17%) and Other (15%) came in at $114.4 million, $212.8 million and $192.3 million, respectively.
Non-GAAP operating margin was 36.2%, expanding 660 basis points (bps) year over year.
Semiconductor & System Design delivered an adjusted operating margin of 38.5% expanding 670 bps on a year-over-year basis. Software Integrity margin expanded 260 bps year over year to 11.2%.
Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $1.27 billion as of Jan 31, 2022, compared with $1.58 billion as of Oct 31, 2021.
Total long-term debt was $24.4 million in the reported quarter, down from $25.1 million as of Oct 31, 2021.
Operating cash flow in the first quarter of fiscal 2022 was $155.7 million.
Guidance
For the second quarter of fiscal 2022, Synopsys expects revenues between $1.240 billion and $1.270 billion. Management estimates non-GAAP earnings between $2.35 and $2.40 per share. Non-GAAP expenses are anticipated in the band of $800 million to $810 million.
For fiscal 2022, Synopsys raised guidance. The company now projects revenues of $4.775-$4.825 billion compared with the prior range of $4.19-$4.22 billion.
Non-GAAP earnings for the fiscal year are now expected between $7.85 and $7.92 per share compared with the earlier guidance of $7.73 and $7.80 per share.
Non-GAAP expenses are still estimated in the range of $3.225-$3.285 billion. Synopsys forecast operating cash flow of $1.450-$1.500 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 56.33% 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 F on the value side, putting it in the fifth quintile 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) Up 3.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Synopsys (SNPS - Free Report) . Shares have added about 3.7% 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 the most recent earnings report in order to get a better handle on the important drivers.
Synopsys' Q1 Earnings and Revenues Beat Estimates
Synopsys reported first-quarter fiscal 2022 non-GAAP earnings of $2.40 per share, beating the Zacks Consensus Estimate of $2.37, reflecting an improvement of 57.9% year over year.
Revenues surged 30.9% year over year to $1.27 billion, driven by growth across its business segments. The top line narrowly beat the Zacks Consensus Estimate of $1.26 billion.
Synopsys benefited from the increasing demand for its products amid the rapid adoption of Big Data, faster computation and Machine Learning. Complex, connected, specialized, and secure chips and systems witnessed strong momentum and drove Synopsys’ quarterly performance.
Quarter in Detail
In the license-type revenue group, Time-Based Product revenues (55.7% of total revenues) of $707.5 million were up 12.1% year over year. Upfront Product revenues (29%) soared 111.2% to $368.3 million. Maintenance and Service revenues (15.3%) increased 18.1% year over year to $194.5 million from the year-ago quarter’s $164.7 million.
Segment-wise, Semiconductor & System Design revenues (91.5% of total revenues) were $1.16 billion, up 32.4% year over year. Within the segment, Electronic Design Automation revenues (50% of revenues) were $632.3 million, while IP & Systems Integration revenues (42% of revenues) came in at $527.5 million.
Software Integrity revenues totaled $107.6 million, contributing approximately 8.5% to the top line in the reported quarter.
Geographically, Synopsys’ revenues in North America (49% of the total) and Europe (10%) were $618 million and $132.7 million, respectively. Revenues from Korea (9%), China (17%) and Other (15%) came in at $114.4 million, $212.8 million and $192.3 million, respectively.
Non-GAAP operating margin was 36.2%, expanding 660 basis points (bps) year over year.
Semiconductor & System Design delivered an adjusted operating margin of 38.5% expanding 670 bps on a year-over-year basis. Software Integrity margin expanded 260 bps year over year to 11.2%.
Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $1.27 billion as of Jan 31, 2022, compared with $1.58 billion as of Oct 31, 2021.
Total long-term debt was $24.4 million in the reported quarter, down from $25.1 million as of Oct 31, 2021.
Operating cash flow in the first quarter of fiscal 2022 was $155.7 million.
Guidance
For the second quarter of fiscal 2022, Synopsys expects revenues between $1.240 billion and $1.270 billion. Management estimates non-GAAP earnings between $2.35 and $2.40 per share. Non-GAAP expenses are anticipated in the band of $800 million to $810 million.
For fiscal 2022, Synopsys raised guidance. The company now projects revenues of $4.775-$4.825 billion compared with the prior range of $4.19-$4.22 billion.
Non-GAAP earnings for the fiscal year are now expected between $7.85 and $7.92 per share compared with the earlier guidance of $7.73 and $7.80 per share.
Non-GAAP expenses are still estimated in the range of $3.225-$3.285 billion. Synopsys forecast operating cash flow of $1.450-$1.500 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 56.33% 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 F on the value side, putting it in the fifth quintile 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.