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Why Is Synopsys (SNPS) Down 16.1% 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 lost about 16.1% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Synopsys Q1 Earnings and Revenues Beat Estimates
Synopsys’ first-quarter fiscal 2021 non-GAAP earnings of $1.52 per share beat the Zacks Consensus Estimate by 4.83%. Moreover, the figure improved 50.5% year over year.
Further, revenues increased 16.3% year over year to $970.3 million and surpassed the Zacks Consensus Estimate by 1.9%, driven by significant contributions from Electronic design automation (EDA), and IP & Systems Integration business segments.
The company is benefiting from the increasing demand for its products amid the rapid adoption of Big Data, faster computation and Machine Learning.
Moreover, robust adoption of the company’s Verification Continuum Platform and Fusion Compiler product within Fusion Design Platform was a major growth driver in the first quarter.
Quarter in Detail
In the license type revenue group, Time-Based Product revenues (65% of total revenues) of $631.3 million were up 13.5% year over year. Maintenance and Service revenues (17%) improved 29.5% to $164.7 million. Upfront Product revenues (18%) grew 15.7% to $174.4 million.
Segment-wise, Semiconductor & System Design revenues (90.5% of total revenues) were $878.3 million, up 17.3% year over year. Within the segment, EDA revenues (55% of revenues) were $536.2 million and IP & Systems Integration revenues (35% of revenues) came in at $339.6 million. Software Integrity revenues totaled $92 million, contributing approximately 9% to the top line in the reported quarter.
Notably, the company updated its reportable geographical segments. Geographically, Synopsys’ revenues in North America (49% of total) were $474.2 million and $105.2 million in Europe (11%). Revenues from Korea (10%), China (12%) and Other (18%) came in at $98.3 million, $115.8 million and $176.9 million, respectively.
Non-GAAP operating margin was 29.6%, expanding 720 basis points (bps) year over year. Semiconductor & System Design delivered an adjusted operating margin of 31.8%, up 790 bps year over year, while Software Integrity margin contracted 80 bps year over year to 8.6%.
Balance Sheet & Cash Flow
Synopsys had cash and cash equivalents of $1.02 billion as of Jan 31, 2021, compared with $1.24 billion as of Oct 31, 2020.
Total long-term debt came in at $25.7 million in the reported quarter compared with the previous quarter’s $100.8 million. Outstanding debt of $123 million was also higher than the previous quarter’s $128 million.
Operating cash flow in the first quarter was $174 million.
Guidance
For second-quarter fiscal 2021, the company’s revenues are expected between $970 million and $1 billion.
Management expects non-GAAP earnings between $1.50 and $1.55 per share.
Non-GAAP expenses are anticipated to be $697-$707 million.
For fiscal 2021, management projects revenues of $4-$4.05 billion.
Non-GAAP earnings for the fiscal year are expected between $6.23 and $6.30 per share.
Operating cash flow is expected between $1.2 billion and $1.3 billion.
Further, management expects strong demand for the company’s advanced solutions and cloud computing services along with 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.
VGM Scores
Currently, Synopsys has an average Growth Score of C, though it is lagging a bit 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly 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) Down 16.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Synopsys (SNPS - Free Report) . Shares have lost about 16.1% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Synopsys Q1 Earnings and Revenues Beat Estimates
Synopsys’ first-quarter fiscal 2021 non-GAAP earnings of $1.52 per share beat the Zacks Consensus Estimate by 4.83%. Moreover, the figure improved 50.5% year over year.
Further, revenues increased 16.3% year over year to $970.3 million and surpassed the Zacks Consensus Estimate by 1.9%, driven by significant contributions from Electronic design automation (EDA), and IP & Systems Integration business segments.
The company is benefiting from the increasing demand for its products amid the rapid adoption of Big Data, faster computation and Machine Learning.
Moreover, robust adoption of the company’s Verification Continuum Platform and Fusion Compiler product within Fusion Design Platform was a major growth driver in the first quarter.
Quarter in Detail
In the license type revenue group, Time-Based Product revenues (65% of total revenues) of $631.3 million were up 13.5% year over year. Maintenance and Service revenues (17%) improved 29.5% to $164.7 million. Upfront Product revenues (18%) grew 15.7% to $174.4 million.
Segment-wise, Semiconductor & System Design revenues (90.5% of total revenues) were $878.3 million, up 17.3% year over year. Within the segment, EDA revenues (55% of revenues) were $536.2 million and IP & Systems Integration revenues (35% of revenues) came in at $339.6 million. Software Integrity revenues totaled $92 million, contributing approximately 9% to the top line in the reported quarter.
Notably, the company updated its reportable geographical segments. Geographically, Synopsys’ revenues in North America (49% of total) were $474.2 million and $105.2 million in Europe (11%). Revenues from Korea (10%), China (12%) and Other (18%) came in at $98.3 million, $115.8 million and $176.9 million, respectively.
Non-GAAP operating margin was 29.6%, expanding 720 basis points (bps) year over year. Semiconductor & System Design delivered an adjusted operating margin of 31.8%, up 790 bps year over year, while Software Integrity margin contracted 80 bps year over year to 8.6%.
Balance Sheet & Cash Flow
Synopsys had cash and cash equivalents of $1.02 billion as of Jan 31, 2021, compared with $1.24 billion as of Oct 31, 2020.
Total long-term debt came in at $25.7 million in the reported quarter compared with the previous quarter’s $100.8 million. Outstanding debt of $123 million was also higher than the previous quarter’s $128 million.
Operating cash flow in the first quarter was $174 million.
Guidance
For second-quarter fiscal 2021, the company’s revenues are expected between $970 million and $1 billion.
Management expects non-GAAP earnings between $1.50 and $1.55 per share.
Non-GAAP expenses are anticipated to be $697-$707 million.
For fiscal 2021, management projects revenues of $4-$4.05 billion.
Non-GAAP earnings for the fiscal year are expected between $6.23 and $6.30 per share.
Operating cash flow is expected between $1.2 billion and $1.3 billion.
Further, management expects strong demand for the company’s advanced solutions and cloud computing services along with 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.
VGM Scores
Currently, Synopsys has an average Growth Score of C, though it is lagging a bit 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly 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.