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FactSet (FDS) to Report Q3 Earnings: Is a Beat in Store?

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FactSet Research Systems Inc. (FDS - Free Report) is scheduled to report third-quarter fiscal 2018 results on Jun 26, before the market opens.

Its top line is expected to benefit from higher organic revenues, acquisitions and dispositions. The new tax reform policy is likely to positively impact the bottom line.

We observe that shares of FactSet have rallied 28.7% in the past year, outperforming the industry’s rise of 27.3%.

                                              One-year Price Performance

 

Top Line to Improve Year Over Year

The Zacks Consensus Estimate for revenues for the fiscal third quarter stands at $339.71 million, indicating year-over-year growth of 8.8%. The top line is expected to grow on the back of higher organic revenues, buyouts and dispositions. Growth in FactSet’s annual subscription value (ASV), driven by new client additions, is likely to act as another growth catalyst.

FactSet Research Systems Inc. Revenue (TTM)

In second-quarter fiscal 2018, total revenues rose 13.9% from the year-ago quarter to $335.23 million. Organic revenues increased 5.7% year over year to $310.38 million. The company’s ASV increased 13.4% to $1.35 billion as of Feb 28, 2018. New client additions in the fiscal second quarter were 86, taking the total to 4,895.

Earnings Likely to Grow on Tax Reform Policy

The Tax Cuts and Jobs Act, which reduced corporate tax rates significantly from 35% to 21%, will benefit FactSet’s earnings in the to-be-reported quarter. Notably, the consensus estimate for earnings per share (EPS) is pegged at $2.14, indicating year-over-year growth of 15.7%.

In the fiscal second quarter, adjusted earnings rose 17.1% from the year-ago quarter to $2.12 per share. The company also raised full-year 2018 guidance for EPS and effective tax rate in the quarter, as a result of the tax reform.

Our Model Suggests a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

FactSet has an Earnings ESP of +0.23% and a Zacks Rank #3, a combination that increases the odds of an earnings beat.

Other Stocks to Consider

Here are some other stocks from the Zacks Business Services sector that investors may consider as our model shows that these have the right combination of elements to beat on earnings in their respective quarterly releases:

Mastercard Incorporated (MA - Free Report) has an Earnings ESP of +2.41% and a Zacks Rank #1. The company is expected to report second-quarter 2018 results on Jul 26. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Republic Services, Inc. (RSG - Free Report) has an Earnings ESP of +2.86% and a Zacks Rank #3. The company is slated to report second-quarter 2018 results on Jul 26.

Automatic Data Processing, Inc. (ADP - Free Report) has an Earnings ESP of +0.06% and a Zacks Rank #1. The company is scheduled to report fourth-quarter fiscal 2018 results on Aug 1.

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