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Synopsys (SNPS) to Post Q4 Earnings: What's in the Cards?

Zacks Equity Research

Synopsys, Inc. SNPS is slated to release fourth-quarter fiscal 2019 results on Dec 4.

For the fiscal fourth quarter, the company estimates revenues in the $830-$860 million band. The Zacks Consensus Estimate for the metric is pegged at $851.1 million, indicating growth of 7.04% from the year-ago reported figure.

Management expects non-GAAP earnings per share within $1.10-$1.15. The Zacks Consensus Estimate for the same stands at $1.13, implying a rise of 44.9% from the prior-year reported number.

The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and matched it once, the average beat being 6.26%.

In the last reported quarter, the company’s non-GAAP earnings of $1.18 per share beat the Zacks Consensus Estimate of $1.1 and also improved 24% year over year.

Further, revenues grew 9.4% year over year to $853 million and exceeded the Zacks Consensus Estimate of $829.5 million as well.

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’ results for the fiscal fourth quarter are likely to reflect increasing global design activity and customer engagements. Rising impact of “AI, Automotive, 5G, IoT, Cloud and the proliferation of Smart Everything” is boosting demand for the company’s advanced solutions, which might have been a stable tailwind.

Strong momentum in Fusion Design Platform is a key driver. Several contract wins from leading companies are also expected to have been an upside during the fiscal fourth quarter.

Additionally, the company 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.

The company’s Verification Continuum platform steadily witnesses excellent demand and competitive gains and is anticipated to have been a major catalyst as well. Robust momentum in interface IP coupled with memory and logic IP might get reflected in IP revenues. Cloud computing is a key catalyst too.

However, geo-political challenges coupled with ambiguities surrounding government actions to restrict trade with Huawei are a concern.

Moreover, a rising competition from the likes of Cadence Design Systems is a woe.

What Our Model Says

The proven Zacks model does not conclusively predict an earnings beat for Synopsys this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. 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’ Zacks Rank #3 and an Earnings ESP of 0.00% make surprise prediction difficult.

Stocks to Consider

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

Canadian Imperial Bank of Commerce CM has an Earnings ESP of +0.61% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General Corporation DG has an Earnings ESP of +1.23% and a Zacks Rank of 2.

CarMax, Inc. KMX has an Earnings ESP of +0.50% and is Zacks #2 Ranked.

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