Synopsys (SNPS) To Report Q2 Earnings: What's In Store?

Synopsys, Inc. (NASDAQ:SNPS) is slated to release second-quarter fiscal 2018 results on May 23.

Notably, the company surpassed the Zacks Consensus Estimate in three of the trailing four quarters, delivering an average positive earnings surprise of 8.4%. In the last reported quarter, the company came up with a positive earnings surprise of 10%.

The question lingering on investors’ mind is whether this vendor of electronic design automation (EDA) software will be able to deliver a positive earnings surprise this time.

Let’s see how things are shaping up prior to this announcement.

We believe the company’s continued focus on introducing products, acquisitions and deal wins will continue to aid financials. The global support provided by the company and its unique intellectual properties are expected to boost results as well.

The company’s inorganic additions are accretive to its portfolio. Apart from enhancing the product suite, these acquisitions strengthen its market reach and drive top-line growth.

Synopsys’ recent additions include PhoeniX Software, Silicon and Beyond, Kilopass Technology and Black Duck Software, which are anticipated to boost the company’s revenue generation going ahead.

Additionally, the company’s time-based license revenue model, which offers better visibility and predictability, is a positive for the company. It ensures effective renting of the software rather than paying a one-time upfront license fee.

However, dampened margins pertaining to increased costs and expenses remain a headwind for near-term profitability. Furthermore, competition from peers and uncertainty surrounding the exact time of realizing acquisition synergies keep us cautious.

What the Zacks Model Unveils

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Synopsys has a Zacks Rank #2 and an Earnings ESP of -1.16%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With a Favorable Combination

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming release.

NetApp, Inc. (NASDAQ:NTAP) has an Earnings ESP of +2.49% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

DXC Technology Company. (NYSE:DXC) has an Earnings ESP of +1.06% and a Zacks Rank #2.

Nutanix Inc. (NASDAQ:NTNX) has an Earnings ESP of +2.98% and a Zacks Rank #3.

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