Why Shares of Synopsys Jumped Today

By Timothy Green Markets Fool.com

What happened

Continue Reading Below

Shares of software and services provider to the semiconductor industry Synopsys (NASDAQ: SNPS) jumped on Thursday following the release of the company's fiscal first-quarter report. The company beat analyst estimates for both revenue and earnings, and it increased its guidance for the full year. The stock was up as much as 10.3% soon after the market open, settling into an 8.8% gain by 12:30 p.m. EST.

So what

Synopsis reported first-quarter revenue of $652.8 million, up 14.8% year over year and $15 million higher than the average analyst estimate. The Core EDA product group, which includes integrated circuit design software and verification products, grew revenue by 8.5% year over year to $368.5 million. The IP, systems, and software integrity product group produced revenue of $214.2 million, up 28.3% year over year.

Image source: Synopsys.

Non-GAAP EPS was $0.94, up from $0.68 in the prior-year period and $0.16 higher than analysts were expecting. GAAP EPS grew to $0.56, up from $0.39. Higher revenue was the main driver of the earnings increase, while a higher tax rate worked in the opposite direction.

Continue Reading Below

Synopsys co-CEO Aart de Geus announced that the company was raising its annual targets thanks to a strong first quarter:

The first fiscal quarter was an excellent beginning to the year, as we substantially exceeded expectations. Business was strong across the board, amplified by the timing of hardware and IP deliverables. Our first quarter results and confidence in the year lead us to increase annual revenue, earnings per share and operating cash flow targets.

Now what

Synopsys now expects to produce between $2.58 billion and $2.61 billion of revenue in 2017, along with non-GAAP EPS between $3.21 and $3.26. Previously, the company had provided guidance ranges of $2.57 billion to $2.60 billion and $3.16 to $3.20 for revenue and non-GAAP EPS, respectively.

With a better-than-expected first quarter in the bag and a slight increase to the full-year outlook, investors had plenty of reasons to bid up the stock on Thursday.

10 stocks we like better than Synopsys
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Synopsys wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.