Cadence Design Systems beat expectations for the fourth quarter and offered a higher outlook for the current quarter and full year ahead. CDNS stock rose Tuesday on the news.
The maker of electronic design automation software late Monday said it earned an adjusted 96 cents a share on sales of $900 million in the December-ended quarter. Analysts had predicted earnings of 92 cents a share on sales of $885 million. On a year-over-year basis, Cadence earnings rose 17% while sales advanced 16%.
For the current quarter, Cadence predicted adjusted earnings of $1.25 a share on sales of $1.01 billion, based on the midpoint of its outlook. Wall Street had been looking for $1.08 a share on sales of $935 million. In the year-earlier period, Cadence earned $1.17 a share on sales of $902 million.
For the full year, Cadence predicted adjusted earnings of $4.95 a share on sales of $4.03 billion. That's based on the midpoint of its guidance. Analysts were projecting 2023 earnings of $4.70 a share on sales of $3.89 billion, according to FactSet. In 2022, Cadence earned an adjusted $4.27 a share, up 30%, on sales of $3.56 billion, up 19%.
CDNS Stock Hits Buy Point
On the stock market today, CDNS stock jumped 7.2% to close at 199.09.
With the advance, CDNS stock broke out of a cup base with a buy point of 195.07, according to IBD MarketSmith charts.
"I remain confident in the long-term secular megatrends that continue to fuel robust design activity across semi and system companies," Chief Executive Anirudh Devgan said in a news release.
Positive Outlook For Design Software Stocks
In a recent note to clients, Deutsche Bank analyst Gianmarco Conti reiterated his buy ratings on Cadence and industry peer Synopsys. He said he believes both companies will perform well despite their semiconductor customers facing slowing sales. That's because chipmakers are continuing to spend on research and development, including design software.
"We are continuously positive on the EDA (electronic design automation) space and on both companies' ability to reap better pricing (mix of premium-priced AI offerings, increased consumption from cross-selling and design demand tailwinds), as well as continuously grow faster than the market whilst operating in an oligopolistic-like environment," Conti said.
Cadence stock is on two IBD stock lists: IBD 50 and Tech Leaders.
CDNS stock ranks first out of 12 stocks in IBD's Computer Software-Design industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 97 out of 99.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
