Synopsys (SNPS) to Report Q4 Earnings: What's in Store?

Synopsys, Inc. SNPS is slated to release fourth-quarter fiscal 2020 results on Dec 2.

The company estimates quarterly revenues in the $1-$1.03 billion band. The Zacks Consensus Estimate for revenues is pegged at $1.02 billion, indicating year-over-year growth of 19.9%.

Management expects non-GAAP earnings per share between $1.51 and $1.56. The Zacks Consensus Estimate for the same is pinned at $1.57, suggesting a 36.5% year-over-year increase.

Synopsys, Inc. Price and Consensus

Synopsys, Inc. Price and Consensus

Synopsys, Inc. price-consensus-chart | Synopsys, Inc. Quote

The company’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average earnings surprise being 15.9%.

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

Factors at Play

Synopsys’ fiscal fourth-quarter performance is likely to have benefited from growing demand for its solid product portfolio. Increasing global design activity and customer engagements are likely to have been growth drivers.

Moreover, the rising impact of AI, 5G, IoT, Cloud and the proliferation of Smart Everything are anticipated to have boosted demand for the company’s advanced solutions. Synopsys’ 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.

Additionally, widespread contract wins and the increasing deployment of the Fusion Platform, including Fusion Compiler, are anticipated to have been key growth drivers. Moreover, Synopsys’ Verification Continuum platform witnesses robust demand and competitive gains, which is anticipated to have been a major catalyst as well.

Notably, the ongoing shift to high-performance cloud computing owing to the coronavirus-induced remote working environment is expected to have aided demand for the company’s Intellectual Property (IP) solutions, such as PCI Express, 112G Ethernet and DDR.

Further, in the last reported quarter, the company introduced a USB4 IP solution for advanced 5nm processes, which is likely to have driven order growth in the to-be-reported quarter. Also, strong adoption of its interface and foundation IP solutions is expected to have boosted revenues for the company’s interface portfolio.

Moreover, Synopsys’s partnerships with industry leaders like Microsoft MSFT and Taiwan Semiconductor Manufacturing Company are expected to have accelerated the deployment of its cloud solutions, thereby aiding the company’s top line in the quarter under review.

Furthermore, the company’s solid electronic design automation (EDA) software partner base, which includes Advanced Micro Devices, Juniper Networks, Realtek, Toshiba and Wolfson, is likely to have served as a major revenue driver.

Additionally, increased design investments in Synopsys’s ARC processors by automotive companies despite the coronavirus-led headwinds in the automotive space are expected to have been a positive.

However, supply-chain and logistic disruptions due to the global lockdown might have partially offset the benefits of the aforementioned factors. Apart from this, heightening competition from the likes of Cadence Design Systems might have played spoilsport.

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.

At present, Synopsys has a Zacks Rank of 3 and an Earnings ESP of 0.00%.

Stocks With Favorable Combinations

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

Construction Partners ROAD has an Earnings ESP of +16.02% and is Zacks #2 Ranked. You can see the complete list of today’s Zacks #1 Rank stocks here.

Signet Jewelers Limited SIG has an Earnings ESP of +13.95% and a Zacks Rank of 2.

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