Earnings Beat: Cadence Design Systems, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Simply Wall St ·  Feb 16 05:57

Last week, you might have seen that Cadence Design Systems, Inc. (NASDAQ:CDNS) released its full-year result to the market. The early response was not positive, with shares down 3.8% to US$296 in the past week. Cadence Design Systems reported US$4.1b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$3.82 beat expectations, being 9.2% higher than what the analysts expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

NasdaqGS:CDNS Earnings and Revenue Growth February 16th 2024

Taking into account the latest results, the consensus forecast from Cadence Design Systems' 15 analysts is for revenues of US$4.59b in 2024. This reflects a decent 12% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to accumulate 8.2% to US$4.14. In the lead-up to this report, the analysts had been modelling revenues of US$4.58b and earnings per share (EPS) of US$4.17 in 2024. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

The consensus price target rose 8.1% to US$315despite there being no meaningful change to earnings estimates. It could be that the analystsare reflecting the predictability of Cadence Design Systems' earnings by assigning a price premium. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Cadence Design Systems at US$350 per share, while the most bearish prices it at US$240. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We can infer from the latest estimates that forecasts expect a continuation of Cadence Design Systems'historical trends, as the 12% annualised revenue growth to the end of 2024 is roughly in line with the 13% annual growth over the past five years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 13% annually. So although Cadence Design Systems is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that in mind, we wouldn't be too quick to come to a conclusion on Cadence Design Systems. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Cadence Design Systems going out to 2026, and you can see them free on our platform here..

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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