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Why Is Synopsys (SNPS) Down 2.1% Since its Last Earnings Report?
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It has been about a month since the last earnings report for Synopsys, Inc. (SNPS - Free Report) . Shares have lost about 2.1% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is SNPS due for a breakout? 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 Q1 Results
Continuing its earnings streak for the eighth consecutive quarter, Synopsys reported stellar first-quarter fiscal 2018 results, wherein the top and bottom lines, both, came ahead of the respective Zacks Consensus Estimate. The results also marked year-over-year improvement.
The company reported non-GAAP earnings per share (excluding stock-based compensation expenses and all one-time items) of $1.10, which came in 17% higher than the year-ago quarter’s non-GAAP earnings of 94 cents. The Zacks Consensus Estimate for the quarter was pegged at $1.00.
Quarter Details
The company’s fiscal first-quarter revenues jumped 17.9% year over year to $769.4 million and came ahead of the previously guided range of $740-$765 million. Reported revenues also surpassed the Zacks Consensus Estimate of $751.4 million.
On a year-over-year basis, revenues were positively impacted by increased adoption of Synopsys’ products, strength in IP and hardware products, as well as the Black Duck acquisition. Apart from this, an extra week during the reported quarter also helped the company in generating more revenues. Excluding the extra-week effect, the company’s top line grew 11% year over year.
Aart de Geus, chairman and co-CEO of Synopsys, noted, "Propelled by the evolving age of 'Smart Everything,' semiconductor and systems companies, along with software developers across many industries, are driving digitization and machine learning, which require more and more advanced chips, sophisticated hardware/software interaction and high levels of software security. As the Silicon to Software partner, our unique combination of leading technologies positions us well to participate in this dynamic wave of opportunity."
Segment wise, License revenues (including time-based and upfront) came in at $662.5 million, up nearly 16.4% from the year-ago quarter. Maintenance and service revenues jumped 27.5% year over year to $106.9 million.
Total non-GAAP costs and expenses flared up 21% on a year-over-year basis to $573 million. Moreover, as a percentage of revenues, the same expanded 200 basis points (bps) from the year-earlier quarter to 74.5%. The increase in total cost and expenses were primarily due to elevated employee compensation and cost of goods sold.
Synopsys’ non-GAAP operating income rose 11.7% on a year-over-year basis and came in at $195.9 million. However, operating margin shrunk 140 bps year over year to 25.5%. Higher operating expenses impacted the operating results.
The company’s non-GAAP net income for the reported quarter came in at $169.6 million, marking year-over-year growth of 16.9%.
Balance Sheet & Cash Flow
Synopsys exited the fiscal first quarter with cash and cash equivalents of $605.9 million compared with $1.048 billion reported at the end of the previous quarter. The decline was mainly due to the funding of the recently-completed acquisitions of Black Duck and Kilopass Technology. Accounts receivables were $499.4 million compared with $451.1 million recorded in the last quarter.
During the quarter, the company used $59.4 million of cash for operational activities due to the aforementioned acquisitions. The company repurchased $180 million worth of its common stock during the quarter. It has remaining $200 million for its current authorization.
Recent Development
During the quarter, Synopsys completed the acquisition of Black Duck Software — a leader in automated solutions for securing and managing open source software — which opened up opportunities for generating additional revenues in the reported quarter. The addition of Black Duck's Software Composition Analysis solution will enhance Synopsys' product offering and expand customer reach, consequently boosting the top line.
Apart from this, in the first quarter the company also acquired Kilopass Technology — a provider of one-time programmable (OTP) non-volatile memory (NVM) IP with applications in automotive, mobile, industrial, and Internet of Things (IoT) areas. This buyout will help Synopsys offer a wide portfolio of efficient IP solutions. The customers are anticipated to gain from the combined force of the two companies, while the robust portfolio is expected to be a top-line booster for Synopsys in the near future.
Guidance
Buoyed by splendid quarterly performance, Synopsys raised its fiscal 2018 outlook. The company now expects 2018 revenues to be in the range of $2.92-$2.95 billion (mid-point $2.935), up from the earlier guidance range of $2.88-$2.91 billion (mid-point $2.895).
Non-GAAP earnings per share are now projected between $3.76 and $3.74 (mid-point $3.705 per share), up from the prior projection of $3.46-$3.53 (mid-point $3.495 per share).
The company noted that the acquisition of Black Duck will be dilutive to its earnings initially but will be accretive over the long run. Chief financial officer of Synopsys, Trac Pham stated that, “We expect it to be $0.12 dilutive to 2018 non-GAAP EPS, reach breakeven in the second half of 2019, and be accretive thereafter.”
Operating cash flow is projected in the range of $500-$550 million.
In addition to these, the company initiated guidance for the fiscal second quarter as well. It estimates revenues in the range of $765-$790 million (mid-point $777.5 million). The company expects non-GAAP expenses within $575-$585 million. Management predicts non-GAAP earnings per share in the range of $1.06 and $1.05 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter. In the past month, the consensus estimate has shifted by 39.1% due to these changes.
At this time, SNPS has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stocks has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, SNPS has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Synopsys (SNPS) Down 2.1% Since its Last Earnings Report?
It has been about a month since the last earnings report for Synopsys, Inc. (SNPS - Free Report) . Shares have lost about 2.1% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is SNPS due for a breakout? 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 Q1 Results
Continuing its earnings streak for the eighth consecutive quarter, Synopsys reported stellar first-quarter fiscal 2018 results, wherein the top and bottom lines, both, came ahead of the respective Zacks Consensus Estimate. The results also marked year-over-year improvement.
The company reported non-GAAP earnings per share (excluding stock-based compensation expenses and all one-time items) of $1.10, which came in 17% higher than the year-ago quarter’s non-GAAP earnings of 94 cents. The Zacks Consensus Estimate for the quarter was pegged at $1.00.
Quarter Details
The company’s fiscal first-quarter revenues jumped 17.9% year over year to $769.4 million and came ahead of the previously guided range of $740-$765 million. Reported revenues also surpassed the Zacks Consensus Estimate of $751.4 million.
On a year-over-year basis, revenues were positively impacted by increased adoption of Synopsys’ products, strength in IP and hardware products, as well as the Black Duck acquisition. Apart from this, an extra week during the reported quarter also helped the company in generating more revenues. Excluding the extra-week effect, the company’s top line grew 11% year over year.
Aart de Geus, chairman and co-CEO of Synopsys, noted, "Propelled by the evolving age of 'Smart Everything,' semiconductor and systems companies, along with software developers across many industries, are driving digitization and machine learning, which require more and more advanced chips, sophisticated hardware/software interaction and high levels of software security. As the Silicon to Software partner, our unique combination of leading technologies positions us well to participate in this dynamic wave of opportunity."
Segment wise, License revenues (including time-based and upfront) came in at $662.5 million, up nearly 16.4% from the year-ago quarter. Maintenance and service revenues jumped 27.5% year over year to $106.9 million.
Total non-GAAP costs and expenses flared up 21% on a year-over-year basis to $573 million. Moreover, as a percentage of revenues, the same expanded 200 basis points (bps) from the year-earlier quarter to 74.5%. The increase in total cost and expenses were primarily due to elevated employee compensation and cost of goods sold.
Synopsys’ non-GAAP operating income rose 11.7% on a year-over-year basis and came in at $195.9 million. However, operating margin shrunk 140 bps year over year to 25.5%. Higher operating expenses impacted the operating results.
The company’s non-GAAP net income for the reported quarter came in at $169.6 million, marking year-over-year growth of 16.9%.
Balance Sheet & Cash Flow
Synopsys exited the fiscal first quarter with cash and cash equivalents of $605.9 million compared with $1.048 billion reported at the end of the previous quarter. The decline was mainly due to the funding of the recently-completed acquisitions of Black Duck and Kilopass Technology. Accounts receivables were $499.4 million compared with $451.1 million recorded in the last quarter.
During the quarter, the company used $59.4 million of cash for operational activities due to the aforementioned acquisitions. The company repurchased $180 million worth of its common stock during the quarter. It has remaining $200 million for its current authorization.
Recent Development
During the quarter, Synopsys completed the acquisition of Black Duck Software — a leader in automated solutions for securing and managing open source software — which opened up opportunities for generating additional revenues in the reported quarter. The addition of Black Duck's Software Composition Analysis solution will enhance Synopsys' product offering and expand customer reach, consequently boosting the top line.
Apart from this, in the first quarter the company also acquired Kilopass Technology — a provider of one-time programmable (OTP) non-volatile memory (NVM) IP with applications in automotive, mobile, industrial, and Internet of Things (IoT) areas. This buyout will help Synopsys offer a wide portfolio of efficient IP solutions. The customers are anticipated to gain from the combined force of the two companies, while the robust portfolio is expected to be a top-line booster for Synopsys in the near future.
Guidance
Buoyed by splendid quarterly performance, Synopsys raised its fiscal 2018 outlook. The company now expects 2018 revenues to be in the range of $2.92-$2.95 billion (mid-point $2.935), up from the earlier guidance range of $2.88-$2.91 billion (mid-point $2.895).
Non-GAAP earnings per share are now projected between $3.76 and $3.74 (mid-point $3.705 per share), up from the prior projection of $3.46-$3.53 (mid-point $3.495 per share).
The company noted that the acquisition of Black Duck will be dilutive to its earnings initially but will be accretive over the long run. Chief financial officer of Synopsys, Trac Pham stated that, “We expect it to be $0.12 dilutive to 2018 non-GAAP EPS, reach breakeven in the second half of 2019, and be accretive thereafter.”
Operating cash flow is projected in the range of $500-$550 million.
In addition to these, the company initiated guidance for the fiscal second quarter as well. It estimates revenues in the range of $765-$790 million (mid-point $777.5 million). The company expects non-GAAP expenses within $575-$585 million. Management predicts non-GAAP earnings per share in the range of $1.06 and $1.05 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter. In the past month, the consensus estimate has shifted by 39.1% due to these changes.
Synopsys, Inc. Price and Consensus
Synopsys, Inc. Price and Consensus | Synopsys, Inc. Quote
VGM Scores
At this time, SNPS has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stocks has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, SNPS has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.