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Founded in 1998 and headquartered in New York, MSCI (MSCI) provides decision support tools, including indexes, portfolio risk and performance analytics, and corporate governance products and services to institutional investors.
Their applications and solutions help investors in core investment activities, including allocating assets, constructing and optimizing portfolios and understanding and managing investment risk and performance.
MSCI serves 99 of the top 100 largest money managers, and total assets benchmarked to MSCI equity indexes exceed $12.4 trillion globally (as of September 30, 2017).
The company operates through the following segments: Index, Analytics and All Other. Their well-known brands include MSCI, Barra, RiskMetrics, IPD, FEA, InvestorForce and others.
The company has about more than 3,000 employees globally.
Excellent Results and Rising Estimates
MSCI reported excellent results for its fourth quarter 2017, beating on both the top and bottom lines. Q4 EPS came in at $1.15 per share, significantly ahead of the Zacks Consensus Estimate of $0.99.
Operating revenues for Q4 increased 14.3% year-over-year to $334.8 million. Revenue growth was driven mainly by 40.7% increase in asset-based fees (due to higher revenue from ETFs linked to MSCI indexes).
The 2018 guidance was also better than street consensus.
The company has an excellent record of beating estimates, as you can see from the chart below:
MSCI Inc Price, Consensus and EPS Surprise
MSCI Inc Price, Consensus and EPS Surprise | MSCI Inc Quote
Analysts have raised their estimates after excellent earnings report. Zacks Consensus Estimates for the current and next year have increased to $5.41 per share and $6.17 per share from $4.79 and $5.52 respectively, before the report.
Poised to Benefit from ETF Industry’s Exponential Growth
The Exchange Traded Fund (ETF) industry has been growing exponentially. Total assets invested in ETFs and ETPs listed globally reached a new high of $5.15 trillion at the end of January 2018, per ETFGI.
MSCI has been a leader in equity indexes with over 990 equity ETFs based on MSCI indexes.
As of January 30, there were over $807 billion of ETF assets, or one-fifth of the equity ETF market tracking MSCI indexes. The ETF assets linked to MSCI indexes were up more than 57% from one year ago.
As of December 31, there were a total of 992 ETFs benchmark to MSCI indexes, or about 22% of the equity ETF market.
Returning Capital to Shareholders
The company has been returning a lot of capital to shareholders via dividends and buybacks. Since 2012, they have returned $2.5 billion to shareholders.
And while share repurchases have come down in 2017, dividends have continued to grow at a fast pace.
The company is a leader in equity indexes and poised to benefit from rising trend for passive investing via ETFs and globalization.
In addition to a top Zacks Rank, the Zacks Industry Rank is also in the top 25%, suggesting continued outperformance in the short- to mid-term.
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