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FactSet (FDS) Up 2.2% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for FactSet Research (FDS - Free Report) . Shares have added about 2.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is FactSet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
FactSet Research Systems reported mixed first-quarter fiscal 2020 results, wherein earnings topped the Zacks Consensus Estimate but revenues missed the same.
The company reported adjusted earnings per share of $2.58, which surpassed the Zacks Consensus Estimate by 6.6% and increased 9.8% on a year-over-year basis driven by strong operating performance.
Revenues in Detail
FactSet’s revenues of $366.7 million missed the Zacks Consensus Estimate by 0.2% and increased 4.3% year over year. The uptick was driven by higher sales of analytics, content and technology solutions (CTS) as well as wealth management solutions.
Organic revenues increased 4.2% year over year to $367.9 million. Region-wise, U.S. revenues increased to $231.3 million from $222.2 million in the year-ago quarter. International revenues were $135.3 million compared with $129.4 million in the year-ago quarter.
ASV Plus Professional Services
FactSet’s Annual Subscription Value (ASV) plus professional services of $1.48 billion was flat year over year. Organically, it increased 4.1% year over year. Buy-side and sell-side ASV growth rates were 4% and 4%, respectively. Nearly 83.9% of organic ASV was generated by buy-side clients. The rest were derived from sell-side firms performing functions like mergers and acquisitions advisory work, equity research and capital markets services.
ASV generated from the United States was $907.5 million, up 3.5% from the prior-year quarter’s level. Internationally, ASV was $546.2 million, up 4.8% year over year. FactSet added 119 clients in the reported quarter, taking the total number to 5,574. Annual client retention was 89%. At the end of the quarter, total employee count was 9,681, up 1.1% year over year.
Operating Results
Adjusted operating income came in at $124.7 million, up 12.1% from the year-ago quarter’s figure. Adjusted operating margin increased 240 basis points (bps) to 33.9%. Selling, general and administration expenses increased 4.9% to $88.5 million. Total operating expenses increased 0.9% to $253.5 million.
Balance Sheet and Cash Flow
FactSet exited first-quarter fiscal 2020 with cash and cash equivalents of $336.2 million compared with $359.8 million in the previous quarter. Long-term debt of $574.2 million was flat year over year. In the quarter, the company generated $95.8 million of cash from operating activities and capital expenditure was $26.8 million. Free cash flow was $69 million.
FactSet repurchased 343,000 shares for $84.4 million during the reported quarter. As of Nov 30, 2019, the company had $154.2 million available for share repurchases. A quarterly dividend of $27.3 million was paid out on Dec 19.
Fiscal 2020 Outlook
FactSet reaffirmed its outlook for fiscal 2020. The company expects adjusted EPS between $9.85 and $10.15. The company expects revenues between $1.49 billion and $1.50 billion. Organic ASV plus professional services for fiscal 2020 is projected to increase in the range of $65-$85 million. Adjusted operating margin of 28.5%-29.5% is expected. The annual effective tax rate is anticipated between 17% and 17.5%.
How Have Estimates Been Moving Since Then?
Estimates review followed a flat path over the past two months.
VGM Scores
Currently, FactSet has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
FactSet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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FactSet (FDS) Up 2.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for FactSet Research (FDS - Free Report) . Shares have added about 2.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is FactSet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
FactSet Beats Q1 Earnings Estimates, Lags Revenues
FactSet Research Systems reported mixed first-quarter fiscal 2020 results, wherein earnings topped the Zacks Consensus Estimate but revenues missed the same.
The company reported adjusted earnings per share of $2.58, which surpassed the Zacks Consensus Estimate by 6.6% and increased 9.8% on a year-over-year basis driven by strong operating performance.
Revenues in Detail
FactSet’s revenues of $366.7 million missed the Zacks Consensus Estimate by 0.2% and increased 4.3% year over year. The uptick was driven by higher sales of analytics, content and technology solutions (CTS) as well as wealth management solutions.
Organic revenues increased 4.2% year over year to $367.9 million. Region-wise, U.S. revenues increased to $231.3 million from $222.2 million in the year-ago quarter. International revenues were $135.3 million compared with $129.4 million in the year-ago quarter.
ASV Plus Professional Services
FactSet’s Annual Subscription Value (ASV) plus professional services of $1.48 billion was flat year over year. Organically, it increased 4.1% year over year. Buy-side and sell-side ASV growth rates were 4% and 4%, respectively. Nearly 83.9% of organic ASV was generated by buy-side clients. The rest were derived from sell-side firms performing functions like mergers and acquisitions advisory work, equity research and capital markets services.
ASV generated from the United States was $907.5 million, up 3.5% from the prior-year quarter’s level. Internationally, ASV was $546.2 million, up 4.8% year over year. FactSet added 119 clients in the reported quarter, taking the total number to 5,574. Annual client retention was 89%. At the end of the quarter, total employee count was 9,681, up 1.1% year over year.
Operating Results
Adjusted operating income came in at $124.7 million, up 12.1% from the year-ago quarter’s figure. Adjusted operating margin increased 240 basis points (bps) to 33.9%. Selling, general and administration expenses increased 4.9% to $88.5 million. Total operating expenses increased 0.9% to $253.5 million.
Balance Sheet and Cash Flow
FactSet exited first-quarter fiscal 2020 with cash and cash equivalents of $336.2 million compared with $359.8 million in the previous quarter. Long-term debt of $574.2 million was flat year over year. In the quarter, the company generated $95.8 million of cash from operating activities and capital expenditure was $26.8 million. Free cash flow was $69 million.
FactSet repurchased 343,000 shares for $84.4 million during the reported quarter. As of Nov 30, 2019, the company had $154.2 million available for share repurchases. A quarterly dividend of $27.3 million was paid out on Dec 19.
Fiscal 2020 Outlook
FactSet reaffirmed its outlook for fiscal 2020. The company expects adjusted EPS between $9.85 and $10.15. The company expects revenues between $1.49 billion and $1.50 billion. Organic ASV plus professional services for fiscal 2020 is projected to increase in the range of $65-$85 million. Adjusted operating margin of 28.5%-29.5% is expected. The annual effective tax rate is anticipated between 17% and 17.5%.
How Have Estimates Been Moving Since Then?
Estimates review followed a flat path over the past two months.
VGM Scores
Currently, FactSet has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
FactSet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.