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D.A. Davidson Downgrades Mentor Graphics Following Q2 Results, Guidance

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D.A. Davidson Downgrades Mentor Graphics Following Q2 Results, Guidance

Mentor Graphics Corp (NASDAQ: MENT) reported robust FQ2 results, with the revenue and EPS ahead of expectations.

However, D.A. Davidson’s Thomas Diffely downgraded the rating on the company from Buy to Neutral, with a price target of $24.

FQ2 Beat

Mentor Graphics reported FQ2 revenue of $254 million and pro forma EPS of $0.15, ahead of the consensus and the estimates.

“Strength in the quarter (versus initial guidance) came from a recovery in the Emulation business that had been bouncing along at trough levels since late 2015,” Diffely mentioned.

Related Link: Mentor Graphics Beats Estimates, Mixed Guidance

Record Guidance

The company issued record FQ3 guidance, in line with the consensus forecasts, with revenue of $310 million and pro forma EPS of $0.42.

“A combination of a continued Emulation recovery and a strong order book from the system houses should drive a record third quarter and, in turn, reduce the risk of a required fourth quarter ramp to meet full year guidance,” the analyst explained.

Full-Year Guidance

Despite the beat FQ2 results and its record FQ3 guidance, Mentor Graphics left its full-year guidance unchanged, expecting modest revenue growth of 3 percent and earnings growth of 8 percent.

“At this point it is apparently too difficult to ascertain if the upside in the quarter was simply a pull-in from business projected to hit later in the year or a true upside to expectations that would not be offset by other segments,” Diffely noted.

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Latest Ratings for MENT

DateFirmActionFromTo
Nov 2016Credit SuisseDowngradesOutperformNeutral
Nov 2016DA DavidsonDowngradesBuyNeutral
Oct 2016Credit SuisseInitiates Coverage OnOutperform

View More Analyst Ratings for MENT
View the Latest Analyst Ratings

 

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