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Synopsys (SNPS) Down 3.7% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Synopsys (SNPS - Free Report) . Shares have lost about 3.7% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Synopsys due for a breakout? 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 catalysts.
Synopsys' Earnings and Revenues Beat Estimates in Q2
Synopsys reported second-quarter fiscal 2022 non-GAAP earnings of $2.50 per share, beating the Zacks Consensus Estimate of $2.37. The bottom line improved 47.1% year over year.
Revenues surged 24.9% year over year to $1.28 billion, driven by growth across its business segments. The top line beat the Zacks Consensus Estimate of $1.25 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 (56.6% of total revenues) of $723.8 million were up 11.6% year over year. Upfront Product revenues (26.3%) surged 61% to $336.6 million. Maintenance and Service revenues (17.1%) increased 31.5% year over year to $218.8 million from the year-ago quarter’s $166.4 million.
Segment-wise, Semiconductor & System Design revenues (91.2% of total revenues) were $1.17 billion, up 25.4% year over year. Within the segment, Electronic Design Automation revenues (50% of revenues) were $641.8 million, while IP &Systems Integration revenues (41% of revenues) amounted to $520.6 million.
Software Integrity revenues totaled $112.9 million, contributing approximately 8.8% to the top line in the reported quarter.
Geographically, Synopsys’ revenues in North America (46% of the total) and Europe (9%) were $586.2 million and $116.2 million, respectively. Revenues from Korea (9%), China (17%) and Other (19%) were $119.2 million, $215.6 million and $242.1 million, respectively.
Non-GAAP operating margin was 36.8%, expanding 580 basis points (bps) year over year.
Semiconductor & System Design delivered an adjusted operating margin of 39.2%, expanding 600 bps on a year-over-year basis. Software Integrity margin expanded 250 bps year over year to 11.5%.
Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $1.72 billion as of Apr 30, 2022, compared with $1.27 billion as of Jan 31, 2022.
Total long-term debt was $23.8 million in the reported quarter, down from $24.4 million as of Apr 30, 2021.
During the first six months of fiscal 2022, operating cash flow was $905.7 million.
Guidance
For the third quarter of fiscal 2022, Synopsys expects revenues between $1.210 billion and $1.240 billion. Management estimates non-GAAP earnings between $2.01 and $2.06 per share. Non-GAAP expenses are anticipated in the band of $830 million to $840 million.
For fiscal 2022, Synopsys raised guidance. The company now projects revenues to be $5.000-$5.050 billion compared with the prior range of $4.775-$4.825 billion.
Non-GAAP earnings for the fiscal year is now expected to be between $8.63 and $8.70 per share, compared with the earlier guidance of $7.85 and $7.92 per share.
Non-GAAP expenses are estimated in the range of $3.350 billion to $3.380 billion compared with the previously guided range of $3.225-$3.285 billion. Synopsys now forecast an operating cash flow of $1.550-$1.600 billion, up from prior estimate of $1.450-$1.500 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 29.71% due to these changes.
VGM Scores
At this time, Synopsys has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 B. 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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Synopsys (SNPS) Down 3.7% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Synopsys (SNPS - Free Report) . Shares have lost about 3.7% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Synopsys due for a breakout? 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 catalysts.
Synopsys' Earnings and Revenues Beat Estimates in Q2
Synopsys reported second-quarter fiscal 2022 non-GAAP earnings of $2.50 per share, beating the Zacks Consensus Estimate of $2.37. The bottom line improved 47.1% year over year.
Revenues surged 24.9% year over year to $1.28 billion, driven by growth across its business segments. The top line beat the Zacks Consensus Estimate of $1.25 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 (56.6% of total revenues) of $723.8 million were up 11.6% year over year. Upfront Product revenues (26.3%) surged 61% to $336.6 million. Maintenance and Service revenues (17.1%) increased 31.5% year over year to $218.8 million from the year-ago quarter’s $166.4 million.
Segment-wise, Semiconductor & System Design revenues (91.2% of total revenues) were $1.17 billion, up 25.4% year over year. Within the segment, Electronic Design Automation revenues (50% of revenues) were $641.8 million, while IP &Systems Integration revenues (41% of revenues) amounted to $520.6 million.
Software Integrity revenues totaled $112.9 million, contributing approximately 8.8% to the top line in the reported quarter.
Geographically, Synopsys’ revenues in North America (46% of the total) and Europe (9%) were $586.2 million and $116.2 million, respectively. Revenues from Korea (9%), China (17%) and Other (19%) were $119.2 million, $215.6 million and $242.1 million, respectively.
Non-GAAP operating margin was 36.8%, expanding 580 basis points (bps) year over year.
Semiconductor & System Design delivered an adjusted operating margin of 39.2%, expanding 600 bps on a year-over-year basis. Software Integrity margin expanded 250 bps year over year to 11.5%.
Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $1.72 billion as of Apr 30, 2022, compared with $1.27 billion as of Jan 31, 2022.
Total long-term debt was $23.8 million in the reported quarter, down from $24.4 million as of Apr 30, 2021.
During the first six months of fiscal 2022, operating cash flow was $905.7 million.
Guidance
For the third quarter of fiscal 2022, Synopsys expects revenues between $1.210 billion and $1.240 billion. Management estimates non-GAAP earnings between $2.01 and $2.06 per share. Non-GAAP expenses are anticipated in the band of $830 million to $840 million.
For fiscal 2022, Synopsys raised guidance. The company now projects revenues to be $5.000-$5.050 billion compared with the prior range of $4.775-$4.825 billion.
Non-GAAP earnings for the fiscal year is now expected to be between $8.63 and $8.70 per share, compared with the earlier guidance of $7.85 and $7.92 per share.
Non-GAAP expenses are estimated in the range of $3.350 billion to $3.380 billion compared with the previously guided range of $3.225-$3.285 billion. Synopsys now forecast an operating cash flow of $1.550-$1.600 billion, up from prior estimate of $1.450-$1.500 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 29.71% due to these changes.
VGM Scores
At this time, Synopsys has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 B. 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.