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FactSet (FDS) to Report Q2 Earnings: What's in the Offing?

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FactSet Research Systems Inc. (FDS - Free Report) is set to report second-quarter fiscal 2018 earnings results on Mar 27. The question lingering in investors’ minds is whether or not this online financial data-related products and services provider will be able to post a positive earnings surprise in the quarter.

Notably, the company has a positive earnings surprise history. Over the trailing four quarters, its results surpassed the Zacks Consensus Estimate each time, with an average positive surprise of 1.2%. So, let’s see how things are shaping up prior to this announcement.

What to Expect?

The Zacks Consensus Estimate for the fiscal second quarter is pegged at $2.05, reflecting a year-over-year increase of 13.3%. Further, analysts polled by Zacks anticipate revenues of $334.8 million, up 13.7% from the year-ago quarter.

Factors to Consider

The company is consistent with product innovation across segments with special emphasis on financial services to gain customers. Moreover, the company’s acquisitions with the likes of BISAM Technologies and Interactive Data have enhanced its product suite and have helped expand its international footprint. It will also help FactSet to maximize value for partners and provide exclusive content set. All this will continue to aid the company in gaining new customers, thereby driving the fiscal second-quarter top-line performance.

Furthermore, the company is one of the leading providers of online integrated data-related products and services for the investment community. According to technavio, the Global Business Information market is projected to witness CAGR of 5.2% from 2017 to 2021. FactSet, being one of the key data providers, is expected to capitalize this opportunity and increase share in new markets.

However, the company has been suffering from a declining client-retention ratio. During the fiscal first quarter, the retention ratio came in at 90%, tanking 300 basis points (bps) from the year-ago quarter and 100 bps from the previous quarter. It should be noted that a strong client retention ratio signifies more stable revenues. Therefore, although the company has been adding new clients every quarter, its failure to retain existing clients is a concern.

Moreover, the company caters to a highly competitive industry. With prominent peers such as Bloomberg L.P., Dow Jones & Company Inc. and Thomson Reuters (TRI - Free Report) , competition is likely to intensify. While FactSet has a technological advantage, some of these competitors have greater financial, technical and marketing resources.

FactSet Research Systems Inc. Price and EPS Surprise

What the Zacks Model Unveils?

Our proven model does not conclusively show that FactSet is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

FactSet carries a Zacks Rank #2, which increases the predictive power of ESP, but an ESP of -0.16% makes surprise prediction difficult.

Stocks With Favorable Combinations

Here are some companies you may want to consider as our model shows that these stocks have the right combination of elements to post an earnings beat:

Paychex, Inc. (PAYX - Free Report) , which has an Earnings ESP of +0.20% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Netflix, Inc. (NFLX - Free Report) , which is another Zacks #3 Ranked player, with an Earnings ESP of +0.60%.

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