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FactSet (FDS) to Post Q3 Earnings: Disappointment in Store?

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FactSet Research Systems Inc. (FDS - Free Report) is set to report third-quarter fiscal 2017 results on Jun 27. Last quarter, the company posted a positive earnings surprise of 0.6%. Notably, the stock has surpassed the Zacks Consensus Estimate thrice and missed on one occasion, over the trailing four quarters. It has an average positive earnings surprise of 0.9%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

FactSet is a leading provider of global online integrated data-related products and services for the investment community (primarily bankers, investment managers and brokerage firms). The company’s consistent focus on adding clients, maintaining high client-retention ratio and increasing Annual Subscription Value (ASV) have been driving its top line. The aforesaid factors will continue to have a positive impact on the to-be-reported quarter as well, in our opinion.

Furthermore, the company’s strategy of growing through acquisitions will continue to drive its overall performance. The acquisition of BISAM Technologies S.A. in March this year will enhance its analytics suite and client-reporting capabilities. Its product, Cognity, is expected to boost FactSet’s risk analysis for derivatives and quantitative portfolio construction. Hence, we believe that the synergies from the transaction will prove conducive to the company’s fiscal third-quarter top-line performance.

Nonetheless, introduction of substitute products at competitive pricing by other players such as Bloomberg L.P., Dow Jones & Company Inc., MSCI Inc. (MSCI - Free Report) is a major concern. Therefore, this is predicted to adversely affect FactSet’s fiscal third-quarter results.

Moreover, the company’s disappointing bottom-line guidance for the fiscal third quarter makes us skeptical about its to-be-reported quarter results. FactSet projects adjusted earnings per share to come between $1.80 and $1.86 (mid-point $1.83), while the Zacks Consensus Estimate is pegged at $1.85.

FactSet Research Systems Inc. Price and EPS Surprise

 

Earnings Whispers

Our proven model does not conclusively show that FactSet will beat on earnings 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 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.84. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: FactSet carries a Zacks Rank #4 (Sell). Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a couple of stocks that you may consider, as our model shows that they have the right combination of elements to post an earnings beat:

Advanced Micro Devices Inc. (AMD - Free Report) , with an Earnings ESP of +50.00%, and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Visa Inc (V - Free Report) , with an Earnings ESP of +1.25% and a Zacks Rank #3.

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