Cadence Design Systems Earnings Preview

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Investors are on the edges of their seats, hoping that Cadence Design Systems (NAS: CDNS) will top analyst expectations for the fourth consecutive quarter. The company will unveil its latest earnings on Thursday, July 28. Cadence Design Systems develops electronic design automation software and hardware. It also licenses software, sells hardware technology, and provides engineering and education services throughout the world.

What analysts say:

  • Buy, sell, or hold?: The majority of analysts back Cadence Design Systems as a buy. But with 57.1% of analysts rating it a buy, Cadence Design Systems is still below the mean analyst rating of its nearest 10 competitors, which average 61.5% buys. Analysts don't like Cadence Design Systems as much as competitor Teradyne overall. Eight out of 13 analysts rate Teradyne a buy compared to four of seven for Cadence Design Systems. While analysts still rate the stock a moderate buy, they are a little more optimistic about it compared to three months ago.
  • Revenue Forecasts: On average, analysts predict $275.9 million in revenue this quarter. That would represent a rise of 21.5% from the year-ago quarter.
  • Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.08 per share.

What our community says:
CAPS All Stars are solidly backing the stock, with 88.3% giving it an "outperform" rating. The community at large backs the All Stars, with 78.6% awarding it a rating of "outperform." Fools are bullish on Cadence Design Systems, though the message boards have been quiet lately with only 53 posts in the past 30 days. Cadence Design Systems' bearish CAPS rating of two out of five stars falls short of the Fool community sentiment.

Management:
Revenue has now gone up for three straight quarters.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters:

Quarter

Q1

Q4

Q3

Q2

Gross Margin

83.0%

84.4%

83.3%

82.8%

Operating Margin

6.6%

(10.4%)

(1.3%)

2.3%

Net Margin

2.4%

(14.9%)

53.3%

21.4%

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At the time this article was published

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