Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Shares of FactSet Research Systems Inc. (FDS - Analyst Report) dropped 6.36% on Tuesday after the company’s first-quarter results fell shy of the Zacks Consensus Estimate. The company reported adjusted earnings per share of $1.22 which lagged the Zacks Consensus Estimate of $1.24 per share.

Quarter Details

Although FactSet reported revenues of $222.9 million which increased 5.6% on a year-over-year basis, it lagged the Zacks Consensus Estimate of $224.0 million. Reported revenues were at the lower end of management’s guided range of $222.0 million to $225.0 million. Organic revenue growth, excluding the Revere Data acquisition, was 5.5% year over year.

During the quarter, FactSet’s U.S. revenues grew 6.0% from the year-ago quarter to $153.0 million, while its non-U.S. revenues of $70.0 million were up 4.0% on a year-over-year basis.

FactSet added 25 new clients this quarter taking the tally to a total of 2525. The company retained 92% of clients, amounting to 95% of the Annual Subscription Value (ASV).   

The company’s ASV increased $2.0 million and reached a total figure of $890.0 million on Nov 30, 2013. Nearly 82.2% of this total figure is generated from buy-side clients, with the rest coming from sell-side firms performing functions like Mergers & Acquisition advisory work and equity research.

Now coming to the operational metrics, FactSet reported a 5.9% increase in operating expenses while as a percentage of revenues its operating expenses increased 16 basis points (bps) during the quarter to 66.5%.

FactSet’s operating income increased 5.1% from the year-ago quarter to $74.7 million while its margins contracted 16 bps primarily due to the Revere Data acquisition Adjusted net income during the quarter came in at $53.3 million or $1.22 per share which improved from $49.8 million or $1.11 per share.

FactSet exited the quarter with $174.0 million in cash and cash equivalents, compared with $196.6 million in the previous quarter. The company has no long-term debt.

FactSet generated free cash flow of $53.0 million during the quarter and purchased 530K shares for $57.8 million. The company also paid $15.1 million as dividends. Moreover, FactSet has approved a $300 million share buyback program in addition to the $5 million that the company already has.

Guidance

For the second quarter of fiscal 2014, FactSet expects revenues in the range of $225.0 million to $228.0 million. Apart from this, the operating margin is expected to range between 32.6% and 33.6%, reflecting a 30 bps reduction due to the Revere acquisition and a 50 bps reduction due to the recent acquisition of 60.0% in Matrix Data Limited. While the GAAP earnings per share should range between $1.20 and $1.23 (GAAP diluted earnings per share presumes the enforcement of U.S. Federal R&D tax credit). The Zacks Consensus Estimate for the second quarter is pegged at $1.26.

Our Take

Although FactSet’s first-quarter results lagged the Zacks Consensus Estimate, the year-over-year comparisons were favorable. Moreover, ASV increased compared to the year-ago quarter and FactSet added a good number of clients. However, the company provided a tepid guidance for the forthcoming quarter. The fresh buyback program will also support its earnings per share in the long run and will also invoke shareholders’ loyalty.

FactSet continues to launch products and applications across its segments with special emphasis on financial services to gain more customers. Moreover, the company’s acquisition of Revere Data and the stake in Matrix Data will help it to deliver innovative products to its clients and evolve as a global financial database company. It will also help FactSet to maximize value for its partners and provide customers with exclusive content sets.

Nonetheless, competition from Bloomberg L.P., Dow Jones & Company Inc., MSCI Inc. (MSCI - Snapshot Report) and Thomson Reuters, which are also coming up with substitute products at competitive prices, is a headwind for the company.

FactSet carries a Zacks Rank #3 (Hold). Investors may consider Stratasys Ltd. (SSYS - Analyst Report) and SanDisk Corp. (SNDK - Analyst Report), both carrying a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%