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FactSet (FDS) Up 1.4% 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 1.4% in that time frame, outperforming 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’s Q4 Earnings Miss Estimates
FactSet Research Systems, Inc. reported mixed fourth-quarter fiscal 2023 (ended Aug 31) results, wherein earnings missed, while revenues beat the Zacks Consensus Estimate.
Non-GAAP earnings per share (EPS) (excluding $1.25 from non-recurring items) of $2.93 missed the consensus mark by 16.1% and decreased 6.4% from the year-ago quarter’s reported figure. However, revenues of $535.8 million surpassed the Zacks Consensus Estimate by a slight margin and increased 7.3% from the year-ago quarter’s reported figure. The increase was primarily due to higher sales of Analytics & Trading and Content & Technology solutions.
Revenues in Detail
Organic revenues increased 7.2% year over year to $535.2 million. Region-wise, organic revenue growth from the Americas, the EMEA and the Asia Pacific was 6%, 9.1% and 9.9%, respectively.
Revenues generated from the Americas segment were $343.3 million, 6.1% higher than the year-ago reported figure but missed our estimate of $347.6 million. Revenues from the EMEA came in at $138.6 million, reflecting an increase of 9.7%, and surpassed our estimate by 5.2%. Revenues from the Asia Pacific were $53.9 million, higher than our expected $53.5 million.
ASV Plus Professional Services
FactSet’s Annual Subscription Value (“ASV”) plus professional services were $2.17 billion. Organic ASV plus professional services were $2.1 billion, up 7.2% from the prior-year quarter. Buy-side and sell-side organic ASV growth rates were 6.9% and 9.3%, respectively. Nearly 82% of organic ASV was generated by the buy-side and the rest by sell-side firms.
Organic ASV generated from the United States was $1.38 billion, up 7% from the prior-year quarter. Organic ASV from the EMEA and the Asia Pacific was $558.8 million and $216.7 million, up 7.7% and 8.1% year over year, respectively.
FactSet added 151 clients in the reported quarter, driven by an increase in corporate and wealth clients, taking the total to 7,921. The annual client retention rate was 91%. At the end of the said quarter, the total employee count was 12,237, up 9.2% from the figure registered in the last 12 months, driven primarily by an increase in content, product and technology organizations.
Operating Results
The adjusted operating income was $180.1 million, up 14.4% from the year-ago quarter’s reported figure and surpassed our estimate by 14.1%. The adjusted operating margin increased to 33.6% from 31.5% in the year-ago quarter compared with our estimated 29.5%. Adjusted EBITDA came in at $172.2 million, 8.6% higher than the year-ago figure and beat our estimated $160.8 million.
Balance Sheet and Cash Flow
FactSet exited the quarter with a cash and cash equivalent balance of $425.44 million compared with $486.63 million in the previous quarter. The long-term debt was $1.61 billion compared with the prior quarter’s figure of $1.67 billion. In the reported quarter, FDS generated $175.9 million of cash from operating activities, while capital expenditure was $19.6 million. Free cash flow was $156.3 million.
Guidance for Fiscal 2024
The company reiterated GAAP revenues, which are expected in the band of $2.21-$2.23 billion. FactSet's annual effective tax rate is expected at 17-18%.
FactSet expects adjusted EPS in the range of $15.65-$16.15. The adjusted operating margin is expected in the range of 36.3%-36.7%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
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 D. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.
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FactSet (FDS) Up 1.4% 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 1.4% in that time frame, outperforming 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’s Q4 Earnings Miss Estimates
FactSet Research Systems, Inc. reported mixed fourth-quarter fiscal 2023 (ended Aug 31) results, wherein earnings missed, while revenues beat the Zacks Consensus Estimate.
Non-GAAP earnings per share (EPS) (excluding $1.25 from non-recurring items) of $2.93 missed the consensus mark by 16.1% and decreased 6.4% from the year-ago quarter’s reported figure. However, revenues of $535.8 million surpassed the Zacks Consensus Estimate by a slight margin and increased 7.3% from the year-ago quarter’s reported figure. The increase was primarily due to higher sales of Analytics & Trading and Content & Technology solutions.
Revenues in Detail
Organic revenues increased 7.2% year over year to $535.2 million. Region-wise, organic revenue growth from the Americas, the EMEA and the Asia Pacific was 6%, 9.1% and 9.9%, respectively.
Revenues generated from the Americas segment were $343.3 million, 6.1% higher than the year-ago reported figure but missed our estimate of $347.6 million. Revenues from the EMEA came in at $138.6 million, reflecting an increase of 9.7%, and surpassed our estimate by 5.2%. Revenues from the Asia Pacific were $53.9 million, higher than our expected $53.5 million.
ASV Plus Professional Services
FactSet’s Annual Subscription Value (“ASV”) plus professional services were $2.17 billion. Organic ASV plus professional services were $2.1 billion, up 7.2% from the prior-year quarter. Buy-side and sell-side organic ASV growth rates were 6.9% and 9.3%, respectively. Nearly 82% of organic ASV was generated by the buy-side and the rest by sell-side firms.
Organic ASV generated from the United States was $1.38 billion, up 7% from the prior-year quarter. Organic ASV from the EMEA and the Asia Pacific was $558.8 million and $216.7 million, up 7.7% and 8.1% year over year, respectively.
FactSet added 151 clients in the reported quarter, driven by an increase in corporate and wealth clients, taking the total to 7,921. The annual client retention rate was 91%. At the end of the said quarter, the total employee count was 12,237, up 9.2% from the figure registered in the last 12 months, driven primarily by an increase in content, product and technology organizations.
Operating Results
The adjusted operating income was $180.1 million, up 14.4% from the year-ago quarter’s reported figure and surpassed our estimate by 14.1%. The adjusted operating margin increased to 33.6% from 31.5% in the year-ago quarter compared with our estimated 29.5%. Adjusted EBITDA came in at $172.2 million, 8.6% higher than the year-ago figure and beat our estimated $160.8 million.
Balance Sheet and Cash Flow
FactSet exited the quarter with a cash and cash equivalent balance of $425.44 million compared with $486.63 million in the previous quarter. The long-term debt was $1.61 billion compared with the prior quarter’s figure of $1.67 billion. In the reported quarter, FDS generated $175.9 million of cash from operating activities, while capital expenditure was $19.6 million. Free cash flow was $156.3 million.
Guidance for Fiscal 2024
The company reiterated GAAP revenues, which are expected in the band of $2.21-$2.23 billion. FactSet's annual effective tax rate is expected at 17-18%.
FactSet expects adjusted EPS in the range of $15.65-$16.15. The adjusted operating margin is expected in the range of 36.3%-36.7%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
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 D. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.