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FactSet Research Systems Inc. (FDS - Free Report) reported mixed results for second-quarter fiscal 2017. Adjusted earnings came ahead of the Zacks Consensus Estimate but revenues missed the same.
Lower-than-expected revenues made investors slightly cautious, pulling shares down 5.7% during yesterday’s trade. Moreover, a tepid third-quarter fiscal 2017 earnings guidance negatively impacted the share price.
The company reported adjusted earnings per share of $1.81, which surpassed the Zacks Consensus Estimate by a penny and was toward the higher end of the guided range of $1.78–$1.82. Moreover, adjusted earnings improved 13.8% on a year-over-year basis.
On a GAAP basis, the company reported earnings per share of $1.68 compared with $1.63 in the year-ago quarter.
Quarter Details
FactSet’s revenues of $294.4 million increased 4.5% from the year-ago quarter but missed the Zacks Consensus Estimate of $296 million. Moreover, reported revenues were toward the lower end of the guidance of $293–$298 million. Organic revenues increased 7% year over year to $291.5 million during the quarter.
FactSet witnessed better-than-expected growth across products and geographic regions, which aided quarterly revenues.
During the quarter, FactSet’s revenues from the U.S. grew to $192 million. Excluding the impact of foreign currency, acquisitions and disposition, U.S. revenues and international revenues rose 5.9% and 8.9%, respectively, on a year-over-year basis.
The company’s Annual Subscription Value (ASV) increased 6.5% year over year to $1.19 billion as of Feb 28, 2017. Of this, nearly 83.2% was generated by buy-side clients, while the rest came from sell-side firms performing functions like mergers & acquisition, advisory work and equity research.
FactSet added 143 clients in the reported quarter, taking the tally to 4,404. The company retained 93% of its clients. The retention percentage was more than 95% of ASV.
Coming to the operational metrics, FactSet reported a 3.1% rise in total operating expenses, primarily due to an increase in cost of services (6.2% higher on a year-over-year basis). As a percentage of revenues, operating expenses increased 90 basis points to 68.8%.
FactSet’s adjusted operating income increased 4.5% from the year-ago quarter to $97.4 million. However, operating margin remained flat year over year at 33.1%, mainly due to higher operating expenses as a percentage of revenues.
Adjusted net income during the quarter was $71.8 million compared with $66.1 million in the year-ago quarter.
FactSet exited the quarter with $155.3 million in cash and cash equivalents, compared with $173.3 million in the previous quarter. Long-term debt during the quarter amounted to $365 million.
Cash flow from operations during the six months ended Feb 28, 2017 was $128.1 million. The company generated free cash flow of $71 million in the reported quarter. FactSet purchased approximately 480K shares for $81.1 million under its existing share repurchase authorization. On Mar 27, 2017, the board of directors approved a $300 million expansion share repurchase program. At quarter end, the company had $336.5 million remaining under its share repurchase authorization.
Guidance
For the fiscal third quarter, FactSet expects revenues in the range of $301–$307 million (mid-point $304 million). The BISAM acquisition is expected to add approximately $6 million to revenues. The Zacks Consensus Estimate is pegged at $303 million.
Adjusted operating margin is expected between 32% and 33%. Adjusted earnings per share are projected in the band of $1.80–$1.86 (mid-point $1.83). The Zacks Consensus Estimate stands at $1.85. The annual effective tax rate is expected within 25–26%.
Recent Activities
Recently, FactSet announced the acquisition of BISAM Technologies S.A. FactSet believes that BISAM’s B-One solution will enhance its analytics suite and client-reporting capabilities. Its product – Cognity – is expected to boost FactSet’s risk analysis for derivatives and quantitative portfolio construction. Hence, we believe that that the synergies from the acquisition will provide tailwind to the company’s financials.
Our Take
FactSet reported mixed results for the fiscal second quarter. While earnings per share gave a decent show, quarterly revenues were toward the lower end of company’s own guidance range.
Notably, FactSet has underperformed the Zacks Categorized Business Information Services industry. The company has gained just 0.7% on a year-to-date basis, while the industry recorded a growth of 8.7% in the same time frame.
Nonetheless, we are encouraged by favorable year-over-year comparisons on both counts. Moreover, the company has a high client retention ratio, which is a positive. Also, ASV increased year over year and the company added a good number of clients.
The share repurchase program is expected to support earnings in the long run apart from boosting shareholder value.
The company continues with product innovation across its segments with special emphasis on financial services to gain more customers. Moreover, the company’s acquisitions of Portware, Revere Data, Matrix Data and Code Red will enhance its product suite and help it to evolve as a global financial database company. It will also help FactSet to maximize value for its partners and provide exclusive content set.
Nonetheless, substitute products at competitive prices, from the likes of Bloomberg L.P., Dow Jones & Company Inc., MSCI Inc. (MSCI - Free Report) and Thomson Reuters (TRI - Free Report) are giving tough competition toFactSet.
Analog Devices has a long-term expected earnings per share growth rate of 10.4%.
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FactSet (FDS) Tops Q2 Earnings Estimates, Misses Revenues
FactSet Research Systems Inc. (FDS - Free Report) reported mixed results for second-quarter fiscal 2017. Adjusted earnings came ahead of the Zacks Consensus Estimate but revenues missed the same.
Lower-than-expected revenues made investors slightly cautious, pulling shares down 5.7% during yesterday’s trade. Moreover, a tepid third-quarter fiscal 2017 earnings guidance negatively impacted the share price.
The company reported adjusted earnings per share of $1.81, which surpassed the Zacks Consensus Estimate by a penny and was toward the higher end of the guided range of $1.78–$1.82. Moreover, adjusted earnings improved 13.8% on a year-over-year basis.
On a GAAP basis, the company reported earnings per share of $1.68 compared with $1.63 in the year-ago quarter.
Quarter Details
FactSet’s revenues of $294.4 million increased 4.5% from the year-ago quarter but missed the Zacks Consensus Estimate of $296 million. Moreover, reported revenues were toward the lower end of the guidance of $293–$298 million. Organic revenues increased 7% year over year to $291.5 million during the quarter.
FactSet witnessed better-than-expected growth across products and geographic regions, which aided quarterly revenues.
During the quarter, FactSet’s revenues from the U.S. grew to $192 million. Excluding the impact of foreign currency, acquisitions and disposition, U.S. revenues and international revenues rose 5.9% and 8.9%, respectively, on a year-over-year basis.
The company’s Annual Subscription Value (ASV) increased 6.5% year over year to $1.19 billion as of Feb 28, 2017. Of this, nearly 83.2% was generated by buy-side clients, while the rest came from sell-side firms performing functions like mergers & acquisition, advisory work and equity research.
FactSet added 143 clients in the reported quarter, taking the tally to 4,404. The company retained 93% of its clients. The retention percentage was more than 95% of ASV.
Coming to the operational metrics, FactSet reported a 3.1% rise in total operating expenses, primarily due to an increase in cost of services (6.2% higher on a year-over-year basis). As a percentage of revenues, operating expenses increased 90 basis points to 68.8%.
FactSet’s adjusted operating income increased 4.5% from the year-ago quarter to $97.4 million. However, operating margin remained flat year over year at 33.1%, mainly due to higher operating expenses as a percentage of revenues.
Adjusted net income during the quarter was $71.8 million compared with $66.1 million in the year-ago quarter.
FactSet exited the quarter with $155.3 million in cash and cash equivalents, compared with $173.3 million in the previous quarter. Long-term debt during the quarter amounted to $365 million.
Cash flow from operations during the six months ended Feb 28, 2017 was $128.1 million. The company generated free cash flow of $71 million in the reported quarter. FactSet purchased approximately 480K shares for $81.1 million under its existing share repurchase authorization. On Mar 27, 2017, the board of directors approved a $300 million expansion share repurchase program. At quarter end, the company had $336.5 million remaining under its share repurchase authorization.
Guidance
For the fiscal third quarter, FactSet expects revenues in the range of $301–$307 million (mid-point $304 million). The BISAM acquisition is expected to add approximately $6 million to revenues. The Zacks Consensus Estimate is pegged at $303 million.
Adjusted operating margin is expected between 32% and 33%. Adjusted earnings per share are projected in the band of $1.80–$1.86 (mid-point $1.83). The Zacks Consensus Estimate stands at $1.85. The annual effective tax rate is expected within 25–26%.
Recent Activities
Recently, FactSet announced the acquisition of BISAM Technologies S.A. FactSet believes that BISAM’s B-One solution will enhance its analytics suite and client-reporting capabilities. Its product – Cognity – is expected to boost FactSet’s risk analysis for derivatives and quantitative portfolio construction. Hence, we believe that that the synergies from the acquisition will provide tailwind to the company’s financials.
Our Take
FactSet reported mixed results for the fiscal second quarter. While earnings per share gave a decent show, quarterly revenues were toward the lower end of company’s own guidance range.
Notably, FactSet has underperformed the Zacks Categorized Business Information Services industry. The company has gained just 0.7% on a year-to-date basis, while the industry recorded a growth of 8.7% in the same time frame.
Nonetheless, we are encouraged by favorable year-over-year comparisons on both counts. Moreover, the company has a high client retention ratio, which is a positive. Also, ASV increased year over year and the company added a good number of clients.
The share repurchase program is expected to support earnings in the long run apart from boosting shareholder value.
The company continues with product innovation across its segments with special emphasis on financial services to gain more customers. Moreover, the company’s acquisitions of Portware, Revere Data, Matrix Data and Code Red will enhance its product suite and help it to evolve as a global financial database company. It will also help FactSet to maximize value for its partners and provide exclusive content set.
Nonetheless, substitute products at competitive prices, from the likes of Bloomberg L.P., Dow Jones & Company Inc., MSCI Inc. (MSCI - Free Report) and Thomson Reuters (TRI - Free Report) are giving tough competition toFactSet.
Currently, FactSet carries a Zacks Rank #2 (Buy). Another stock worth considering in the broader technology sector is Analog Devices, Inc. (ADI - Free Report) , which sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
Analog Devices has a long-term expected earnings per share growth rate of 10.4%.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>