Cadence Design Systems Earnings Preview: What to Expect on October 28th

## Cadence Design Systems Earnings Preview: What to Expect on October 28th

Cadence Design Systems (CDNS), a leading provider of electronic design automation (EDA) software, is gearing up to release its quarterly earnings report on

Monday, October 28th, 2024

. Investors will be keenly watching for both the company’s financial performance and its guidance for the upcoming quarter. This article aims to provide a comprehensive overview of what to anticipate from CDNS’s earnings announcement.

### Analyst Expectations and Past Performance

Analysts anticipate Cadence Design Systems to report an earnings per share (EPS) of $1.44 for the quarter. Investor enthusiasm centers around the potential for CDNS to surpass these estimates and deliver positive guidance for Q4 2024. It’s crucial to remember that while earnings performance is important, market reactions often hinge on the guidance provided by the company.

Looking back at past performance, CDNS exceeded EPS estimates by $0.06 in the last quarter (Q2 2024), yet the share price dipped by 1.42% the following day. This highlights the unpredictable nature of market reactions and the importance of considering factors beyond just the earnings numbers.

Here’s a glimpse at CDNS’s past earnings performance and the resulting price changes:

| Quarter | EPS Estimate | EPS Actual | Price Change % |
|—|—|—|—|
| Q2 2024 | 1.22 | 1.28 | -1.0% |
| Q1 2024 | 1.13 | 1.17 | -1.0% |
| Q4 2023 | 1.33 | 1.38 | -4.0% |
| Q3 2023 | 1.20 | 1.26 | -1.0% |

### Stock Performance and Analyst Sentiment

As of October 24th, Cadence Design Systems shares were trading at $251.28. Over the past 52 weeks, the stock has risen by 9.73%. These positive returns suggest a bullish sentiment among long-term shareholders going into this earnings release.

To gauge market expectations, it’s crucial to understand the perspectives of analysts. Cadence Design Systems has received a total of 6 ratings from analysts, with the consensus rating being

Neutral

. The average one-year price target stands at $291.33, suggesting a potential 15.94% upside.

### Peer Analysis: Comparing Cadence Design Systems to its Competitors

To gain further insight into CDNS’s market position and performance expectations, we can compare it to its prominent industry peers: Synopsys, Workday, and Autodesk. This analysis sheds light on their relative performance expectations and market positioning.

*

Synopsys:

Analysts are projecting a

Buy

trajectory for Synopsys, with an average one-year price target of $656.5, indicating a potential 161.26% upside.
*

Workday:

Analysts maintain an

Outperform

status for Workday, with an average one-year price target of $292.35, indicating a potential 16.34% upside.
*

Autodesk:

Analysts project a

Neutral

trajectory for Autodesk, with an average one-year price target of $300.32, suggesting a potential 19.52% upside.

### Key Financial Metrics and Peer Comparison

| Company | Consensus | Revenue Growth | Gross Profit | Return on Equity |
|—|—|—|—|—|
| Cadence Design Systems | Neutral | 8.61% | $921.41M | 5.86% |
| Synopsys | Buy | 12.65% | $1.24B | 5.49% |
| Workday | Outperform | 16.68% | $1.57B | 1.60% |
| Autodesk | Neutral | 11.90% | $1.36B | 12.17% |

Key Takeaway:

Cadence Design Systems ranks at the bottom for Revenue Growth among its peers. It holds a middle position in terms of Gross Profit. However, its Return on Equity is the lowest compared to its peers. This suggests that CDNS’s financial performance might be lagging behind its competitors in certain areas.

### Understanding Cadence Design Systems’ Business Model

Cadence Design Systems provides a suite of electronic design automation software, intellectual property (IP), and system design and analysis products. These products are essential for automating the complex process of chip design, enhancing design accuracy, productivity, and complexity. The company offers a comprehensive portfolio of design IP and system-level analysis and verification solutions, catering to a wide range of customers.

One key growth driver for CDNS is the convergence of semiconductor companies expanding into systems-like operations and systems companies integrating in-house semiconductor design capabilities. This trend has led to an increase in EDA customers, fueling growth for vendors like Cadence. The ongoing digitalization of various end markets further adds to this positive outlook for EDA providers.

### A Closer Look at CDNS’s Financial Performance

*

Market Capitalization:

CDNS’s market capitalization currently sits below industry benchmarks, indicating a smaller scale compared to its peers. This might be attributed to factors such as growth expectations or operational capacity.
*

Revenue Growth:

Over a three-month period, Cadence Design Systems achieved a revenue growth rate of 8.61%, which is a significant increase in top-line earnings. However, it falls short of the average growth rate seen among peers in the Information Technology sector.
*

Net Margin:

Cadence Design Systems excels in net margin, reaching 21.64%. This indicates efficient cost management and robust financial health.
*

Return on Equity (ROE):

CDNS demonstrates a strong ROE of 5.86%, exceeding industry averages. This indicates effective use of equity capital and excellent financial performance.
*

Return on Assets (ROA):

CDNS also excels in ROA, surpassing industry benchmarks with a figure of 3.55%. This reflects efficient asset management and solid financial health.
*

Debt Management:

Cadence Design Systems’ debt-to-equity ratio stands below the industry average at 0.32, signifying a lower reliance on debt financing and a more conservative financial approach.

### Conclusion: What to Look for in CDNS’s Earnings Report

Investors should pay close attention to CDNS’s revenue growth, guidance for the next quarter, and its ability to navigate the competitive landscape within the EDA industry. The company’s financial performance, particularly its ability to improve its revenue growth and enhance its profitability, will be key factors to watch.

To stay updated on all earnings releases for Cadence Design Systems, visit our earnings calendar on our website.