Can Synopsys Inc. (SNPS) Surprise this Earnings Season? - Analyst Blog

Synopsys Inc. SNPS is set to report second-quarter fiscal 2014 results on May 21. Last quarter, the company posted a positive earnings surprise of 61.3%. It is also worth noting that Synopsys has outperformed the Zacks Consensus Estimate in all the four preceding quarters with a positive earnings surprise average of 43.4%.

Let us see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Synopsys reported mixed first-quarter 2014 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. However, revenues improved on a year-over-year basis, impacted by higher adoption of Synopsys' products.

We believe the company's recent product launches, acquisitions and deal wins will boost results, going ahead. Moreover, the unique intellectual properties and global support provided by the company will likely drive its forthcoming results. Additionally, the company's acquisition of Coverity will expand Synopsys' reach in the software quality, testing and security tools market.

However, competition from Adobe Systems, Advent Software and Ansys Inc. coupled with a challenging technology spending environment and uncertainty regarding 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 this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 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 40 cents. Hence, the difference is 0.00%.

Zacks Rank: Synopsys' Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies, which you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

BlackBerry Limited BBRY has an Earnings ESP of +14.29% and holds a Zacks Rank #2 (Buy).

Infinera Corporation INFN, Earnings ESP of +33.33% and a Zacks Rank #2

Best Buy Co., Inc. BBY, Earnings ESP of +5.00% and a Zacks Rank #3 (Hold)

 

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