On Tuesday, Baird adjusted its price target on shares of Cadence Design Systems (NASDAQ:CDNS), reducing the figure to $338 from the previous $341, while retaining an Outperform rating on the stock. The adjustment follows the company's recent quarterly earnings report.
Cadence Design reported a year-over-year revenue increase of 9% for the quarter, slightly exceeding expectations by 2%. Despite a slight decline in EBIT margin from 42% to 40%, the company outperformed the consensus estimate of 39%. Earnings per share (EPS) rose by 5% year-over-year, which was a 5% improvement over expectations.
The firm's reported obligations (RPO) remained consistent quarter-over-quarter at $6.0 billion, marking a 13% increase from the previous year. Bookings surpassed internal forecasts due to robust recurring revenue, which contributed to this stability.
Looking ahead, Cadence Design has updated its full-year 2024 outlook, now anticipating revenue growth between 12% and 14%, an increase from the previous forecast which predicted a mere 1% rise.
This revision includes the impact of the BETA CAE (NYSE:CAE) acquisition. The company also expects EBIT margins for the fiscal year to be between 42% and 43%, consistent with the previous year's margin.
EPS growth projections have been adjusted to a range of 12% to 16% year-over-year, contrasting with an initial prediction of a 1% decrease, although the second quarter's positive results were slightly offset by a $0.12 per share dilution from mergers and acquisitions activities.
The latter half of 2024 is anticipated to be a turning point for the company, with the third quarter expected to see a 15% increase in year-over-year revenue, and the fourth quarter implied to surge by approximately 29%. This forecasted growth is attributed mainly to the timing of upfront revenue, particularly in the Intellectual Property (IP) segment.
In other recent news, Cadence Design Systems has projected its third-quarter revenue and profit to fall below expectations, with anticipated revenue between $1.165 billion and $1.195 billion and earnings per share (EPS) forecasted from $1.39 to $1.49.
Despite this, the company raised its revenue outlook for fiscal 2024 to a range of $4.60 billion to $4.66 billion. However, it has reduced its annual EPS forecast to between $5.77 and $5.97.
Baird and KeyBanc Capital Markets have shown confidence in Cadence Design's future growth, with Baird raising the price target on Cadence Design Systems shares to $341 and KeyBanc increasing it to $355.
These adjustments reflect expectations of an upward revision in estimates due to increased research and development investments and the launch of new verification hardware cycle.
In addition to these financial developments, Cadence Design Systems has expanded its operations, unveiling the Cadence Janus Network-on-Chip (NoC) to address data delivery challenges in complex system-on-chip (SoC) components. Furthermore, Cadence has completed the acquisition of BETA CAE Systems International AG, a strategic move expected to contribute approximately $40 million to Cadence's 2024 revenue.
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