What's In The Offing For Cadence (CDNS) In Q1 Earnings?

Cadence Design Systems Inc. (NASDAQ:CDNS) is set to deliver first-quarter 2018 results on Apr 23. Notably, the company has surpassed the Zacks Consensus Estimate in two of the trailing four quarters and came in line in the other two, recording an average positive surprise of 1.49%.

In the fourth quarter of fiscal 2017, earnings were 39 cents per share, which were in line with the Zacks Consensus Estimate. However, the figure surged 14.7% from the year-ago quarter. Moreover, revenues increased 7% year over year to $501.7 million, beating the Zacks Consensus Estimate of $498 million.

Guidance & Estimates

For the first-quarter of 2018, Cadence expects non-GAAP earnings in the range of 36-38 cents per share and total revenues to be in the range of $500-$510 million.

The Zacks Consensus Estimate for earnings is pegged at 38 cents per share. Revenues are estimated to be $505.76 million, in line with the mid-point of the management’s guidance for the quarter.

Notably, Cadence stock has returned 16.5% in the past year underperforming the 36.9% rally of the industry it belongs to.

Product Enhancements & Displays

Cadence executed notable first-of-a-kind successful projects during the quarter.

The company strengthened its collaboration with Imec to tapeout the industry’s first ever 3nm test chip. The chip complemented Cadence’s innovative digital implementation tools with Imec’s development infrastructure. It is designed to aid digital transformation of mobile architecture at advanced nodes.

Additionally, in early January this year, the company’s Cadence Tensilica HiFi DSP core became the first DSP IP enabled to support Dolby Atmos for PCs. It will enhance PC experience as well as empower users with an improved battery life and reduced power consumption.

Cadence Sigrity PowerDC technology adopted the new open neutral file format of Future Facilities’ during the quarter. This will expand its thermal component model base by effectively organizing the thermal supply chain and reducing the design cycle duration by up to two weeks.

Collaborations to Boost End-User Experience

Cadence Design together with Advanced Semiconductor Engineering (“ASE”) unveiled a System-in-Package (“SiP”) EDA solution to effectively verify and design Fan-Out Chip-on-Substrate (“FOCoS”) multi-die packages. The solution will enable ASE to deliver high-performance futuristic package technologies.

Further, Cadence Tensilica Vision P5 DSP enabled GEO Semiconductor’s (“GEO”) GW5400 camera video processor to run company’s in-camera computer vision. The DSP platform’s advanced driver assistance systems (“ADAS”) capabilities will enhance automated driving experience.

The low power, high performance featured Cadence Tensilica Fusion F1 DSP was enabled to support Galileo Satellite Navigation’s (“GSN”) software-based Global Navigation Satellite System (“GNSS”) GPS receiver during the quarter. The newly added technology will boost the company’s DSP platform user experience as they can avail cost-effective location-based IoT services.

We believe that all these factors will positively impact the company’s results in soon-to-be reported quarter and bolster its customer base going ahead.

What Does Our Model Say

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. Notably, sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Cadence has a Zacks Rank #3 and an Earnings ESP of -1.33%, which indicates an unlikely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are few stocks from the broader technology sector, you may want to consider as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Western Digital (NASDAQ:WDC) has an Earnings ESP of +2.20% and a Zacks Rank #1.

Paycom (NYSE:PAYC) has an Earnings ESP of +0.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

GrubHub (NYSE:GRUB) has an Earnings ESP of +2.78% and a Zacks Rank #2.

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