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Synopsys (SNPS) to Report Q2 Earnings: What's in the Cards?

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Synopsys, Inc. SNPS is slated to release second-quarter fiscal 2019 results on May 22.

Notably, the company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and matched it once, the average beat being 3.65%.

In the last reported quarter, the company’s bottom and top-line figures topped the Zacks Consensus Estimate. Revenues marked a year-over-year improvement but the bottom line figure was a couple of cents lower than the year-ago quarter’s number.

For the fiscal second quarter, the company anticipates revenues in the $810-$850 million range. 

The Zacks Consensus Estimate for the metric is pegged at $826.2 million, indicating growth of 6.4% from the year-ago reported figure.

Management expects non-GAAP earnings per share within $1.07-$1.12. The Zacks Consensus Estimate for the same stands at $1.09, implying a rise of 0.93% from the prior-year reported figure.

Synopsys, Inc. Price and EPS Surprise

Synopsys, Inc. Price and EPS Surprise

Synopsys, Inc. price-eps-surprise | Synopsys, Inc. Quote

Let’s see, how things are shaping up for this announcement.

Factors at Play

Synopsys’ upcoming quarterly results are likely to benefit from growth across its product groups. Large and expanded renewals with semiconductor companies are a tailwind. The company’s penetration into new and growing artificial intelligence (AI) chip companies is projected to be a steady key driver.

Robust trends in the core electronic design automation (EDA) market, driven by a consistent chip and system complexity, are a positive. The company’s Fusion Design Platform, launched last November and witnessing high demand, is expected to boost results in the quarter under review.

Further, a broad-based adoption of ZeBu Server 4 product by customers’ designing storage, networking and AI chips will help drive the company’s results.

With the increasing need for enhanced security measures in the wake of worsening security threats in interconnected systems laden with software, demand for the company’s solutions is shooting up. This might further aid its impending quarterly results.

However, U.S.-China trade tensions and slackened smartphone demand pose major challenges to the semiconductor market, which makes us apprehensive about Synopsys’ near-term results.

Further, escalating costs and expenses are an overhang on the company’s margins. Additionally, a rising competition from the likes of Cadence Design Systems Inc. (CDNS - Free Report) is another concern.

What the Model Says

The proven Zacks model clearly shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has high chances of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Synopsys currently carries a Zacks Rank #2, which increases the predictive power of ESP. However, its Earnings ESP of 0.00% makes surprise prediction difficult.

Key Picks

Here are some stocks worth considering as our model shows that these have the right combination of elements to beat on earnings in the upcoming releases:

Intuit Inc. INTU has an Earnings ESP of +0.59% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

GTT Communications, Inc. GTT has an Earnings ESP of +16.07% and a Zacks Rank #3.

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