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Cadence (CDNS) to Report Q4 Earnings: What's in the Cards?

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Cadence Design Systems Inc. (CDNS - Free Report) is set to report fourth-quarter 2019 results on Feb 12.

For the quarter, the company expects revenues in the range of $590-$600 million. 

The Zacks Consensus Estimate for revenues is currently pegged at $596.4 million, indicating growth of 4.7% from the year-ago quarter.

The consensus mark for fourth-quarter earnings has been steady at 53 cents over the past 30 days. The estimate indicates year-over-year growth of 1.9%.

Notably, the company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters with the positive earnings surprise being 7.4% on average.

Let’s see how things have shaped up for this announcement.
 

Factors to Consider

Robust adoption of Cadence’s digital & signoff, custom & analog, and IP solutions along with an expanded customer base is anticipated to get reflected in fourth-quarter results.

Notably, adoption of the company’s digital full flow solutions have gained traction. In the previous quarter MediaTek and Uhnder Inc. selected the solution, while the Innovus solution was adopted by Mellanox (MLNX - Free Report) .

Moreover, Cadence received its largest IP order ever, which included its Tensilica processor family and design IP portfolio, from a marquee semiconductor company in the to-be-reported quarter.

Cadence has been sharpening its silicon-based design strategy to meet the computing demands of 5G and AI applications. Growth in domain specific computing as well as silicon-based startups has been driving demand for high performance, low power computing, high bandwidth connectivity, and high-density storage, which is likely to have aided the company in to-be-reported quarter.

Moreover, the company added the Celsius Thermal Solver, an electro-thermal co-simulation solution for electronic systems, to its portfolio of system analysis products, which is expected to have driven top-line growth in the fourth quarter.

Notably, the product has already been adopted by Arm Holdings, an U.K. based semiconductor company and Bosch, a German engineering and technology company.

Cadence’s system design and verification solutions have also been witnessing strong demand due to growing system design complexity and high cost of failure. This is expected to have contributed to the company’s growth in the fourth quarter.

Notably, a global marquee customer expanded its hardware footprint with additional Z1 capacity and Protium X1, which was one of the largest hardware orders ever for Cadence. 

However, export limitations due to the ongoing trade situation with China is expected to have been a headwind.

Q4 Development

On Dec 2, Cadence entered into an agreement with National Instruments Corporation to acquire the latter’s wholly owned subsidiary AWR Corporation. The acquisition is expected to strengthen the company’s 5G RF communications capabilities.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Cadence has a Zacks Rank #2 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

Applied Materials, Inc. (AMAT - Free Report) has an Earnings ESP of +2.89% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alteryx, Inc. (AYX - Free Report) has an Earnings ESP of +6.49% and a Zacks Rank #1.

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