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What’s in the Cards for Synopsys (SNPS) in Q4 Earnings?

Zacks

Synopsys Inc. SNPS is set to report fourth-quarter fiscal 2016 results on Nov 30. Last quarter, the company posted a positive earnings surprise of 41.86%. Notably, the stock has outperformed the Zacks Consensus Estimate thrice in the preceding four quarters with an average positive earnings surprise of 25.14%.

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

Factors to Consider

Synopsys posted better-than-expected third quarter of fiscal 2016 results. Also, third quarter revenues saw a year-over-year improvement, mainly 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 boost results. Moreover, unique intellectual properties and global support provided by the company will likely drive its forthcoming results. Additionally, the company’s acquisition of Coverity is expected to expand its reach in the software quality, testing and security tools market.

The company announced the expansion of its existing share repurchase program, which has increased the authorization to $500 million. The step 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 on the sidelines.

SYNOPSYS INC Price and EPS Surprise

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 46 cents. Hence, the difference is 0.00%. 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 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:

Marvell Technology Group Ltd. MRVL, with an Earnings ESP of +8.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here

Broadcom Ltd. AVGO, with an Earnings ESP of +1.74% and a Zacks Rank #3

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