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FactSet (FDS) Down 10% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for FactSet Research (FDS - Free Report) . Shares have lost about 10% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is FactSet due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
FactSet’s Earnings and Revenues Beat Estimates in Q1
FactSet Research Systems Inc. (FDS - Free Report) reported better-than-expected first-quarter fiscal 2022 results.
Adjusted earnings per share of $3.25 beat the Zacks Consensus Estimate by 8.7% and increased 12.8% year over year. The bottom line was driven by higher revenues and decreased tax rate.
FactSet’s revenues of $424.7 million in the quarter surpassed the Zacks Consensus Estimate by 1.3% and increased 9.4% year over year. The uptick was driven by higher sales of analytics and research and advisory solutions.
The company’s shares have gained 46.8% over the past year, significantly outperforming the 25.8% growth of the industry it belongs to.
Revenues in Detail
Organic revenues increased 9.1% year over year to $423.2 million. Region-wise, organic revenue growth from Americas, EMEA and Asia Pacific were 9%, 9% and 14% respectively, driven mainly by analytics, content and technology solutions and workstation growth.
ASV Plus Professional Services
FactSet’s Annual Subscription Value (“ASV”) plus professional services was $1.7 billion, up 9.2% year over year. Buy-side and sell-side ASV growth rates were 8.5% and 13.2%, respectively. Organic ASV plus professional services was $1.7 billion, up 8.9% from the prior year quarter. Nearly 83% of organic ASV was generated by buy-side and the rest by sell-side firms.
Organic ASV generated from the United States was $1 billion, up 9.4% from the prior-year quarter’s levels. Organic ASV from EMEA and Asia Pacific regions were $453.4 million and 176.2 million, up 7.2% and 13.6% year over year, respectively. FactSet added 306 clients in the reported quarter, driven by an increase in corporate clients, taking the total to 6,759. Annual client retention rate was 92%. At the end of the quarter, total employee count was 10,898, up 2.6% year over year.
Operating Results
Adjusted operating income came in at $142.7 million, up 7.3% from the year-ago quarter’s figure. Adjusted operating margin decreased to 28.9% from 31.2% in the year-ago quarter. Selling, general and administration expenses increased 20% to $94.9 million. Total operating expenses increased 13.1% to $302 million.
Balance Sheet and Cash Flow
FactSet exited the quarter with cash and cash equivalents balance of $673.9 million compared with $681.9 million in the previous quarter. Long-term debt was $574.6 million compared with $574.7 million at the end of the prior quarter. In the quarter, the company generated $72.9 million of cash from operating activities, while capital expenditures were $8.6 million. Free cash flow was $64.3 million.
Fiscal 2021 Outlook
FactSet anticipates adjusted EPS in the range of $12-$12.30, the midpoint ($12.15) of which is lower than the current Zacks Consensus Estimate of $12.21.
The company expects revenues between $1.705 billion and $1.720 billion. The current Zacks Consensus Estimate is pegged at $1.72 billion.
Organic ASV plus professional services for fiscal 2022 is projected to increase in the range of $105-$135 million over fiscal 2021.
Adjusted operating margin is projected to be of 32.5-33.5%. The annual effective tax rate is expected to be between 14.5% and 15.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, FactSet has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, FactSet has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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FactSet (FDS) Down 10% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for FactSet Research (FDS - Free Report) . Shares have lost about 10% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is FactSet due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
FactSet’s Earnings and Revenues Beat Estimates in Q1
FactSet Research Systems Inc. (FDS - Free Report) reported better-than-expected first-quarter fiscal 2022 results.
Adjusted earnings per share of $3.25 beat the Zacks Consensus Estimate by 8.7% and increased 12.8% year over year. The bottom line was driven by higher revenues and decreased tax rate.
FactSet’s revenues of $424.7 million in the quarter surpassed the Zacks Consensus Estimate by 1.3% and increased 9.4% year over year. The uptick was driven by higher sales of analytics and research and advisory solutions.
The company’s shares have gained 46.8% over the past year, significantly outperforming the 25.8% growth of the industry it belongs to.
Revenues in Detail
Organic revenues increased 9.1% year over year to $423.2 million. Region-wise, organic revenue growth from Americas, EMEA and Asia Pacific were 9%, 9% and 14% respectively, driven mainly by analytics, content and technology solutions and workstation growth.
ASV Plus Professional Services
FactSet’s Annual Subscription Value (“ASV”) plus professional services was $1.7 billion, up 9.2% year over year. Buy-side and sell-side ASV growth rates were 8.5% and 13.2%, respectively. Organic ASV plus professional services was $1.7 billion, up 8.9% from the prior year quarter. Nearly 83% of organic ASV was generated by buy-side and the rest by sell-side firms.
Organic ASV generated from the United States was $1 billion, up 9.4% from the prior-year quarter’s levels. Organic ASV from EMEA and Asia Pacific regions were $453.4 million and 176.2 million, up 7.2% and 13.6% year over year, respectively. FactSet added 306 clients in the reported quarter, driven by an increase in corporate clients, taking the total to 6,759. Annual client retention rate was 92%. At the end of the quarter, total employee count was 10,898, up 2.6% year over year.
Operating Results
Adjusted operating income came in at $142.7 million, up 7.3% from the year-ago quarter’s figure. Adjusted operating margin decreased to 28.9% from 31.2% in the year-ago quarter. Selling, general and administration expenses increased 20% to $94.9 million. Total operating expenses increased 13.1% to $302 million.
Balance Sheet and Cash Flow
FactSet exited the quarter with cash and cash equivalents balance of $673.9 million compared with $681.9 million in the previous quarter. Long-term debt was $574.6 million compared with $574.7 million at the end of the prior quarter. In the quarter, the company generated $72.9 million of cash from operating activities, while capital expenditures were $8.6 million. Free cash flow was $64.3 million.
Fiscal 2021 Outlook
FactSet anticipates adjusted EPS in the range of $12-$12.30, the midpoint ($12.15) of which is lower than the current Zacks Consensus Estimate of $12.21.
The company expects revenues between $1.705 billion and $1.720 billion. The current Zacks Consensus Estimate is pegged at $1.72 billion.
Organic ASV plus professional services for fiscal 2022 is projected to increase in the range of $105-$135 million over fiscal 2021.
Adjusted operating margin is projected to be of 32.5-33.5%. The annual effective tax rate is expected to be between 14.5% and 15.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, FactSet has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, FactSet has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.