Synopsys Inc. (NASDAQ:SNPS) is set to report third-quarter fiscal 2016 results on Aug 17. Last quarter, the company posted a positive earnings surprise of 37.50%. Notably, the stock has outperformed the Zacks Consensus Estimate thrice in the preceding four quarters with an average positive earnings surprise of 18.84%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Synopsys is a vendor of electronic design automation (EDA) software to the semiconductor and electronics industries. We believe that the company’s recent product launches, acquisitions and deal wins will boost third-quarter results.
Moreover, the unique intellectual properties and global support provided by Synopsys will likely drive the upcoming results. Additionally, the company’s acquisitions, such as those of Gold Standard Simulations, Simpleware and Coverity, have expanded its capabilities and customer base, which are expected to aid results in the to-be-reported quarter.
However, intense competition, a challenging technology spending environment and uncertainty on the proper time to realize acquisition synergies keep us on the sidelines.
Earnings Whispers
Our proven model does not conclusively show that Synopsys will beat earnings estimates 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: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 43 cents. Hence, the difference is 0.00%.
Zacks Rank: Although Synopsys’ Zacks Rank #2 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 stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are a couple of stocks that you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Alibaba Group Holding Ltd. (NYSE:BABA) , with an Earnings ESP of +25.58% and a Zacks Rank #3.
Analog Devices Inc. (NASDAQ:ADI) , with an Earnings ESP of +2.63% and a Zacks Rank #3.
The J. M. Smucker Company (NYSE:SJM) , with an Earnings ESP of +2.87% and a Zacks Rank #3
SYNOPSYS INC (SNPS): Free Stock Analysis Report
SMUCKER JM (SJM): Free Stock Analysis Report
ANALOG DEVICES (ADI): Free Stock Analysis Report
ALIBABA GROUP (BABA): Free Stock Analysis Report
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