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FactSet (FDS) Shares Barely Move Since Q1 Earnings Beat

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FactSet Research Systems Inc. (FDS - Free Report)  reported mixed first-quarter fiscal 2023 results with earnings beating the Zacks Consensus Estimate but revenues missing the same.

Adjusted earnings per share of $3.99 beat the Zacks Consensus Estimate by 10.8% and increased 22.8% year over year. The bottom line was driven by higher revenues. There has been no impact of the earnings performance on the stock so far since the results released on Dec 20.

FactSet’s revenues of $504.8 million in the quarter lagged the Zacks Consensus Estimate by 1.2% but increased 18.9% year over year. The uptick was driven by the addition of CUSIP Global Services.

Shares of FDS have declined 19.1% over the past year compared with the 23.9% decline of the industry it belongs to.

Revenues in Detail

Organic revenues increased 9.8% year over year to $452.5 million. Region-wise, organic revenue growth from the Americas, EMEA and the Asia Pacific was 9.1%, 8.5% and 17.8%, respectively.

ASV Plus Professional Services

FactSet’s Annual Subscription Value (ASV) plus professional services were $2 billion, up 18.2% year over year. Organic ASV plus professional services were $1.8 billion, up 8.8% from the prior-year quarter’s level. Buy-side and sell-side organic ASV growth rates were 8% and 14.4%, respectively. Nearly 83% of organic ASV was generated by the buy-side and the rest by sell-side firms.

Organic ASV generated from the United States was $1.2 billion, up 8.5% from the prior-year quarter’s level. Organic ASV from EMEA and the Asia Pacific regions were $487 million and $189.9 million, up 8.8% and 11.1% year over year, respectively.

FactSet added 93 clients in the reported quarter, driven by an increase in corporate and wealth clients, taking the total to 7,631. The annual client retention rate was 92%. At the end of the said quarter, the total employee count was 11,627, up 6.7% from the figure registered in the last 12 months, driven primarily by an increase in content, analytics and trading, and sales organizations.

Operating Results

Adjusted operating income came in at $193.4 million, up 35.5% from the year-ago quarter’s reported figure. Adjusted operating margin increased to 38.3% from 33.6% in the year-ago quarter.

Balance Sheet and Cash Flow

FactSet exited the quarter with a cash and cash equivalents balance of $437.1 million compared with $503.3 million in the previous quarter. Long-term debt was $1.9 billion compared with the prior quarter’s figure of $2 billion. In the reported quarter, FDS generated $106.6 million of cash from operating activities, while capital expenditures were $18 million. Free cash flow was $88.7 million.

Fiscal 2023 Outlook

GAAP revenues are expected in the range of $2,100-$2,115 million. Adjusted operating margin is expected in the range of 34-35%. FactSet's annual effective tax rate is expected in the range of 12.5-13.5%.

Adjusted EPS is expected in the range of $14.5-$14.9. The midpoint of the guided range ($14.7) is below the Zacks Consensus Estimate of $14.87.

FactSet currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Performance of Some Other Business Services Companies

Equifax (EFX - Free Report) reported stellar third-quarter 2022 results, wherein both its earnings and revenues surpassed the respective Zacks Consensus Estimate.

EFX’s adjusted earnings of $1.73 per share beat the Zacks Consensus Estimate by 5.5% but decreased 6.5% on a year-over-year basis. Revenues of $1.24 billion beat the consensus estimate by 2.3% and improved 1.8% year over year.  

Omnicom (OMC - Free Report) also reported better-than-expected third-quarter 2022 results.

OMC’s earnings of $1.77 per share beat the consensus mark by 7.9% and increased 7.3% year over year. Total revenues of $3.4 billion surpassed the consensus estimate by 3% and increased slightly year over year.

The Interpublic Group of Companies (IPG - Free Report) reported third-quarter 2022 adjusted earnings of 63 cents per share, beating the Zacks Consensus Estimate by 6.8%. The bottom line has been constant on a year-over-year basis.

IPG’s net revenues of $2.3 billion beat the consensus estimate by 0.3% but declined 9.7% on a year-over-year basis. Total revenues of $2.64 billion increased 3.8% year over year.

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