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Why Is Cadence (CDNS) Up 5% Since Last Earnings Report?
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It has been about a month since the last earnings report for Cadence Design Systems (CDNS - Free Report) . Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cadence 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 drivers.
Cadence Beats on Q3 Earnings & Revenues
Cadence posted third-quarter 2021 non-GAAP earnings of 80 cents per share, which topped the Zacks Consensus Estimate by 6.7%. The bottom line increased 14.3% year over year.
Revenues of $750.9 million surpassed the Zacks Consensus Estimate by 1.5% and increased 12.6% on a year-over-year basis. The top line benefitted from continued strength across all the segments. The company ended the third quarter with a backlog of $3.7 billion.
Performance in Details
Product & Maintenance revenues (94% of total revenues) of $706.2 million increased 12% year over year.
Services revenues (6%) of $44.7 million increased 23.3% from the year-ago quarter’s figure.
Geographically, Americas, China, Other Asia, Europe, Middle East and Africa (EMEA) and Japan contributed 46%, 13%, 18%, 17% and 6%, respectively, to total revenues.
Product-wise, Custom IC Design & Simulation, Digital IC Design & Signoff, Functional Verification, IP and Systems Design & Analysis contributed 23%, 29%, 23%, 14% and 11% to total revenues, respectively.
Cadence Digital Full Flow saw robust traction in the quarter under review with 13 new customer wins. The company’s Cadence Cerebrus solution witnessed accelerating momentum and was deployed by several customers (including a global mobile semiconductor company) apart from Samsung and Renesas.
Palladium and Protium (especially Z2 and X2) platforms witnessed continued momentum with several deal wins among hyperscale and global mobile customers, added the company.
In the third quarter, Cadence introduced Cadence Helium Virtual and Hybrid Studio platform designed to ramp up development of virtual and hybrid prototypes of complex systems. The platform is currently endorsed by NVIDIA.
Within the System Analysis and Design portfolio, the company unveiled Cadence Integrity 3D-IC platform. The platform combines 3D design planning, implementation and system analysis in a single cockpit. It can be used for 5G communications, hyperscale computing, mobile and automotive applications.
Total non-GAAP costs and expenses increased 12.9% year over year to $483 million.
Non-GAAP gross margin expanded 200 basis points (bps) to 91.6%, but non-GAAP operating margin was down 20 bps on a year-over-year basis to 35.7%.
Balance Sheet & Cash Flow
As of Oct 2, 2021, the company had cash and cash equivalents of approximately $1.014 billion compared with $847 million as of Jul 3, 2021.
The company’s long-term debt came in at $347.4 million as of Oct 2, 2021 compared with $347.2 million as of Jul 3, 2021.
The company generated operating cash flow of $296 million in the reported quarter compared with the prior-quarter’s figure of $380 million. Free cash flow in the quarter under review was $277 million compared with $366 million reported in the previous quarter.
The company repurchased shares worth approximately $110 million in the third quarter. The company had $1.2 billion worth of shares under its buyback authorization as of Oct 2, 2021. In August 2021, Cadence authorized an additional $1 billion buyback plan.
Guidance
Driven by better-than-expected quarterly results, management raised revenue outlook for 2021.
For 2021, revenues are projected in the range of $2.96-$2.98 billion compared with the previous guidance of $2.925-$2.965 billion. Non-GAAP earnings are now expected in the range of $3.24-$3.28 per share compared with $3.14-$3.20 per share guided previously.
Non-GAAP operating margin is now forecast in the range of 37% compared with 36-36.75% anticipated previously. For 2021, operating cash flow is projected in the range of $975-$1.025 billion versus the earlier guidance of $925-$975 million.
For fourth-quarter 2021, revenues are projected in the range of $745-$765 million. Non-GAAP earnings are expected in the range of 76-80 cents per share. Non-GAAP operating margin is forecast at around 35% for the fourth quarter. The company expects to repurchase shares worth $110 million in the current quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Cadence has a strong 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 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, Cadence 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 Cadence (CDNS) Up 5% Since Last Earnings Report?
It has been about a month since the last earnings report for Cadence Design Systems (CDNS - Free Report) . Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cadence 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 drivers.
Cadence Beats on Q3 Earnings & Revenues
Cadence posted third-quarter 2021 non-GAAP earnings of 80 cents per share, which topped the Zacks Consensus Estimate by 6.7%. The bottom line increased 14.3% year over year.
Revenues of $750.9 million surpassed the Zacks Consensus Estimate by 1.5% and increased 12.6% on a year-over-year basis. The top line benefitted from continued strength across all the segments. The company ended the third quarter with a backlog of $3.7 billion.
Performance in Details
Product & Maintenance revenues (94% of total revenues) of $706.2 million increased 12% year over year.
Services revenues (6%) of $44.7 million increased 23.3% from the year-ago quarter’s figure.
Geographically, Americas, China, Other Asia, Europe, Middle East and Africa (EMEA) and Japan contributed 46%, 13%, 18%, 17% and 6%, respectively, to total revenues.
Product-wise, Custom IC Design & Simulation, Digital IC Design & Signoff, Functional Verification, IP and Systems Design & Analysis contributed 23%, 29%, 23%, 14% and 11% to total revenues, respectively.
Cadence Digital Full Flow saw robust traction in the quarter under review with 13 new customer wins. The company’s Cadence Cerebrus solution witnessed accelerating momentum and was deployed by several customers (including a global mobile semiconductor company) apart from Samsung and Renesas.
Palladium and Protium (especially Z2 and X2) platforms witnessed continued momentum with several deal wins among hyperscale and global mobile customers, added the company.
In the third quarter, Cadence introduced Cadence Helium Virtual and Hybrid Studio platform designed to ramp up development of virtual and hybrid prototypes of complex systems. The platform is currently endorsed by NVIDIA.
Within the System Analysis and Design portfolio, the company unveiled Cadence Integrity 3D-IC platform. The platform combines 3D design planning, implementation and system analysis in a single cockpit. It can be used for 5G communications, hyperscale computing, mobile and automotive applications.
Total non-GAAP costs and expenses increased 12.9% year over year to $483 million.
Non-GAAP gross margin expanded 200 basis points (bps) to 91.6%, but non-GAAP operating margin was down 20 bps on a year-over-year basis to 35.7%.
Balance Sheet & Cash Flow
As of Oct 2, 2021, the company had cash and cash equivalents of approximately $1.014 billion compared with $847 million as of Jul 3, 2021.
The company’s long-term debt came in at $347.4 million as of Oct 2, 2021 compared with $347.2 million as of Jul 3, 2021.
The company generated operating cash flow of $296 million in the reported quarter compared with the prior-quarter’s figure of $380 million. Free cash flow in the quarter under review was $277 million compared with $366 million reported in the previous quarter.
The company repurchased shares worth approximately $110 million in the third quarter. The company had $1.2 billion worth of shares under its buyback authorization as of Oct 2, 2021. In August 2021, Cadence authorized an additional $1 billion buyback plan.
Guidance
Driven by better-than-expected quarterly results, management raised revenue outlook for 2021.
For 2021, revenues are projected in the range of $2.96-$2.98 billion compared with the previous guidance of $2.925-$2.965 billion. Non-GAAP earnings are now expected in the range of $3.24-$3.28 per share compared with $3.14-$3.20 per share guided previously.
Non-GAAP operating margin is now forecast in the range of 37% compared with 36-36.75% anticipated previously. For 2021, operating cash flow is projected in the range of $975-$1.025 billion versus the earlier guidance of $925-$975 million.
For fourth-quarter 2021, revenues are projected in the range of $745-$765 million. Non-GAAP earnings are expected in the range of 76-80 cents per share. Non-GAAP operating margin is forecast at around 35% for the fourth quarter. The company expects to repurchase shares worth $110 million in the current quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Cadence has a strong 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 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, Cadence has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.