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Cadence Design Systems Meets Earnings Estimate in 4Q17

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Earnings growth drivers

Cadence Design Systems (CDNS) posted its 4Q17 financial results on January 31, 2018. In 4Q17, the company reported adjusted EPS (earnings per share) of $0.39, which was in line with analysts’ consensus estimate. Moreover, the company’s quarterly EPS rose 14.7%, YoY (year-over-year). For 2017, its EPS were $1.40 compared to $1.21 in the previous year’s quarter.

Solid growth in revenue coupled with the implementation of the new US tax reform has driven Cadence Design Systems’ bottom line growth.

In the graph above, we can see the company’s EPS trend over the last five quarters. During the period, it improved at a CAGR (compound annual growth rate) of 3.5%. In three out of the last five quarters, the company has easily surpassed consensus estimates.

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Annual and quarterly guidance

Cadence Design expects its adjusted EPS to remain in the range of $1.50–$1.60 in 2018, while on a GAAP basis, its EPS are expected to be in the range of $0.80–$0.90. Moreover, in 2018, the company’s effective tax rate is expected to be 16%, up from 23% in 2017.

For 1Q18, the company’s adjusted EPS are expected to remain in the range of $0.36–$0.38, while on a GAAP basis, they’re expected to be in the range of $0.20–$0.22.

As per the Wall Street Journal, other leading customers of Cadence, such as Qualcomm (QCOM), NVIDIA (NVDA), and Juniper Networks (JNPR), also recently reported their 2017 financial results. These chipset makers’ EPS came in at $0.98, $1.57, and $0.53, respectively, easily outpacing estimates.

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