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What's in the Cards for Synopsys (SNPS) in Q1 Earnings?

Synopsys Inc. SNPS is set to release first-quarter fiscal 2018 results on Feb 21. The company has a decent earnings surprise history, having beaten the Zacks Consensus Estimate thrice in the trailing four quarters and delivering an average positive surprise of 10.97%.

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

Factors to Consider

Synopsys, a vendor of electronic design automation (EDA) software to the semiconductor and electronics industries, has been focusing on introduction of products and inorganic growth, which are expected boost revenues.

The company’s acquisitions have helped it to access new market segments, enriching its product portfolio. These additions have also contributed to revenues.

Notably, the company’s recent acquisition of Kilopass Technology has strengthened its one-time programmable (OTP) intellectual property (IP) portfolio. Synopsys also completed the acquisition of Black Duck Software in December 2017. These acquisitions are anticipated to boost Synopsys’ top line.

Also, Synopsys’ time-based license revenue model is impressive. It ensures effective renting of the software rather than paying a one-time upfront license fee. Notably, this revenue model provides better visibility and predictability.

However, escalating costs and expenses, which are dampening margins are headwinds. Additionally, uncertainty regarding the exact time of realizing acquisition synergies and increasing competition from the likes of Cadence Design Systems Inc. CDNS and Mentor Graphics are concerns.

Synopsys, Inc. Price and EPS Surprise

Synopsys, Inc. Price and EPS Surprise | Synopsys, Inc. Quote

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 #4 and an Earnings ESP of 0.00%. This indicates that the company is unlikely to beat estimates. 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 this quarter.

Castlight Health CSLT has an Earnings ESP of +7.69% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

MINDBODY MB has an Earnings ESP of +50.00% and a Zacks Rank #3.

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