Cadence Design Systems topped Wall Street's targets for the September quarter but provided mixed guidance for the current period. CDNS stock fell on Tuesday.
The maker of electronic design automation software late Monday beat expectations for the third quarter. But the San Jose, Calif.-based company came up short with its earnings guidance for the fourth quarter.
On a positive note, Cadence said it expects a "limited and manageable" impact from recent U.S. chip technology export restrictions targeting China.
Cadence Design Systems earned an adjusted $1.06 a share on sales of $902.6 million in the third quarter. Analysts polled by FactSet expected earnings of 96 cents on sales of $871 million. On a year-over-year basis, earnings rose 33% as sales climbed 20%.
Cadence Design Systems Retreats
For the current quarter, Cadence Design Systems forecast adjusted earnings of 91 cents a share on sales of $880 million. That's based on the midpoint of its outlook. Wall Street had predicted earnings of 92 cents on sales of $876 million for the fourth quarter.
On the stock market today, CDNS stock dropped 5.6% to 151.32.
"Generational industry trends are driving continued investment by semiconductor and system companies," Chief Executive Anirudh Devgan said in a news release. "And our broad, differentiated portfolio positions us extremely well to help our customers accelerate their next-generation innovation."
CDNS Stock Consolidating
After the earnings report, KeyBanc Capital Markets analyst Jason Celino reiterated his overweight, or buy, rating on CDNS stock with a price target of 215.
"With secular drivers from increasing silicon content in autos, autonomous driving, 5G, AI/ML (artificial intelligence/machine learning) designs, and increasing chip design complexity, we continue to like the favorable trends in EDA (electronic design automation) and view the recent pullback as a buying opportunity," Celino said in a note to clients.
Cadence Design Systems shares have been consolidating for the past 11 weeks with a buy point of 195.07, according to IBD MarketSmith charts.
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 93 out of 99.
Also, Cadence Design Systems is on IBD's Tech Leaders list.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
