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Is a Surprise in Store for Synopsys (SNPS) in Q1 Earnings?

Synopsys Inc.SNPS is set to report first-quarter fiscal 2017 results on Feb 15. Last quarter, the company posted a positive earnings surprise of 2.17%. Let us see how things are shaping up for this announcement.

Factors at Play

Synopsys posted better-than-expected fourth-quarter fiscal 2016 results. Also, fourth-quarter revenues as well as earnings improved year over year, primarily on the back of higher adoption of Synopsys' products and strength in hardware products.

Synopsys is a vendor of electronic design automation (EDA) software to the semiconductor and electronics industries. We believe the company's recent product launches, acquisitions and deal wins will positively impact the results of to-be-reported quarter. Moreover, unique intellectual properties and global support provided by the company are likely to drive its forthcoming results. Additionally, the acquisition of Cigital and Codiscope will enable Synopsys to offer a comprehensive software security signoff solution to its customers.

Most recently, Synopsys declared that it has acquired certain assets of Forcheck b.v., a privately held software company in the Netherlands. We feel Forcheck will enable Synopsys to offer a more comprehensive portfolio of software solutions. Moreover, through the acquisition, Synopsys will gain Forcheck customers, which will ultimately boost the top line in the to-be reported quarter.

The company recently announced that it is going to buy back $100 million worth of its common stock under an accelerated share repurchase (ASR) agreement with Wells Fargo Bank NA. This reflects the California-based company's sound financial position and favorable prospects.

However, competition from Cadence Design Systems Inc. CDNS and Mentor Graphics Corp., a challenging technology spending environment and uncertainty regarding the exact time of realizing acquisition synergies keep us wary.

Synopsys, Inc. Price and EPS Surprise

Synopsys, Inc. Price and EPS Surprise | Synopsys, Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that Synopsys will beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP for Synopsysis 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 48 cents per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Although Synopsys' Zacks Rank #3 increases the predictive power of ESP, its 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are a couple of companies which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Century Communities, Inc. CCS , with an Earnings ESP of +14.93% and a Zacks Rank #2 You can see the complete list of today's Zacks #1 Rank stocks here.

FirstEnergy Corp. FE , with an Earnings ESP of +2.56% and a Zacks Rank #3.

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FirstEnergy Corporation (FE): Free Stock Analysis Report

Synopsys, Inc. (SNPS): Free Stock Analysis Report

Cadence Design Systems, Inc. (CDNS): Free Stock Analysis Report

Century Communities, Inc. (CCS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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