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

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Synopsys, Inc. (SNPS - Free Report) is slated to release second-quarter fiscal 2020 results on May 20.

For the fiscal second quarter, the company estimates revenues in the $820-$850 million band. The Zacks Consensus Estimate is pegged at $837 million, indicating growth of 0.1% from the year-ago quarter reported figure.

Management expects non-GAAP earnings per share between 96 cents and $1.01. The Zacks Consensus Estimate for the same stands at 99 cents, suggesting a 14.7% year-over-year decline.

The company’s earnings surpassed the Zacks Consensus Estimate in all of the trailing four quarters, the beat being 6.3%, on average.

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

Factors at Play

Synopsys’ fiscal second-quarter performance is likely to have benefited from growing demand for its solid product portfolio. Increasing global design activity and customer engagements is likely to have been a tailwind. The rising impact of “AI, Automotive, 5G, IoT, Cloud and the proliferation of Smart Everything” is anticipated to have boosted demand for the company’s advanced solutions.

Widespread contract wins and the growing deployment of Fusion Platform, including Fusion Compiler, are anticipated to have been key drivers.

Additionally, the company’s performance is likely to have gained from growth in Custom Compiler, which is fueled by large deal wins in the 5G, AI and server chip markets.

Moreover, Synopsys’ Verification Continuum platform steadily witnesses robust demand and competitive gains, and is anticipated to have been a major catalyst as well.

However, with hardware and IP revenues tilted toward the second half, the fiscal second-quarter performance might have been adversely impacted. Further, a rising competition from the likes of Cadence Design Systems is likely to have been a concern.

Additionally, supply-chain and logistic disruptions due to the coronavirus-led global lockdown might have thwarted the company’s quarterly performance.

What Our Model Says

Our proven model does not predict an earnings beat for Synopsys this season. The combination of a positive Earnings ESP, and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the chances of an earnings beat. But that’s not the case here. 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 of 3 and has an Earnings ESP of -0.68%.

Some Stocks With Favorable Combinations

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

NVIDIA Corporation (NVDA - Free Report) has an Earnings ESP of +0.15% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Baidu Inc. (BIDU - Free Report) has an Earnings ESP of +4.45% and carries a Zacks Rank #3, at present.

CrowdStrike Holdings Inc. (CRWD - Free Report) has an Earnings ESP of +3.57% and holds a Zacks Rank of 2 currently.

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