Source investing : Published 07/23/2024, 15:56
On Tuesday, Baird revised its price target on shares of Cadence Design Systems (NASDAQ:CDNS), lowering the number to $338 from $341 previously, while maintaining an Outperform rating on the stock. This adjustment comes on the heels of the company’s latest quarterly earnings report.
Cadence Design reported a 9% year-over-year revenue increase for the quarter, slightly beating expectations of 2%. Despite a slight decline in EBIT margin from 42% to 40%, the company beat market estimates of 39%. Earnings per share (EPS) rose 5% year over year, representing a 5% improvement over expectations.
The company’s reported liabilities remained flat quarter-over-quarter at $6.0 billion, representing a 13% increase from the prior year. Bookings exceeded internal expectations due to strong recurring revenue, which contributed to this stability.
Looking ahead, Cadence Design has updated its forecast for the full year 2024, and now expects revenue to grow between 12% and 14%, an increase from the previous forecast, which expected an increase of only 1%.
This review includes the impact of the BETA CAE acquisition. The company also expects EBIT margins for the fiscal year to range between 42% and 43%, consistent with the prior year’s margin.
EPS growth expectations have been revised to a range of 12% to 16% year over year, as opposed to the initial forecast of a 1% decline, although the positive results for the second quarter were slightly offset by a reduction of US$0.12. per share from mergers and acquisitions activities.
The last half of 2024 is expected to be a turning point for the company, with the third quarter expected to see a 15% increase in revenue year over year, and the fourth quarter expected to rise approximately 29%. This expected growth is mainly due to the timing of upfront revenues, particularly in the intellectual property (IP) sector.
In other recent news, Cadence Design Systems expected its third-quarter revenue and profits to fall below expectations, with revenue expected to range between $1.165 billion and $1.195 billion and earnings per share (EPS) expected to range from $1.39 to $1.49.
Despite this, the company raised its revenue forecast for fiscal 2024 to a range of $4.60 billion to $4.66 billion. However, it lowered its annual EPS forecast to between $5.77 and $5.97.
Baird and KeyBanc Capital Markets expressed confidence in Cadence Design’s future growth, with Baird raising their price target on shares of Cadence Design Systems to $341 and KeyBanc to $355.
These revisions reflect expectations of an upward revision in estimates due to increased R&D investments and the launch of a cycle of new verification devices.
In addition to these financial developments, Cadence Design Systems has expanded its operations, unveiling the Cadence Janus Network-on-Chip (NoC) system to address data communication challenges in complex system-on-chip (SoC) components. Additionally, Cadence has completed the acquisition of BETA CAE Systems International AG, a strategic move that is expected to contribute approximately $40 million to Cadence’s 2024 revenues.
