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FactSet (FDS) Up 9.5% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·4-min read

A month has gone by since the last earnings report for FactSet Research (FDS). Shares have added about 9.5% 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 the most recent earnings report in order to get a better handle on the important catalysts.

FactSet Beats on Q4 Earnings and Revenues Estimates

FactSet Research Systems reported better-than-expected fourth-quarter fiscal 2021 results.

Adjusted earnings per share of $2.88 beat the Zacks Consensus Estimate by 6.3% and stayed flat year over year. The bottom line was driven by higher revenues, offset by increased operating expenses and tax rate.

FactSet’s revenues of $411.9 million in the quarter surpassed the Zacks Consensus Estimate by 1.7% and increased 7.4% year over year. The uptick was driven by higher sales of analytics, content, and technology solutions and research.

Revenues in Detail

Organic revenues increased 6.7% year over year to $410.1 million. Region-wise, U.S. revenues increased to $261.9 million from $245.4 million in the year-ago quarter. EMEA revenues were $109.6 million compared with $101.8 million in the year-ago quarter. Asia Pacific revenues were $40.4 million compared with $36.4 million in the year-ago quarter.

ASV Plus Professional Services

FactSet’s Annual Subscription Value (“ASV”) plus professional services was $1.7 billion, up 7.9%. Buy-side and sell-side ASV growth rates were 6.5% and 12%, respectively. Organic ASV plus professional services was $1.7 billion, up 7.2% from the prior year quarter. Nearly 83% of organic ASV was generated by buy-side and the rest by sell-side firms.

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Organic ASV generated from the United States was $1 billion, up 7.4% from the prior-year quarter’s levels. Organic ASV from EMEA and Asia Pacific regions were $451.3 million and 174.6 million, up 5.6% and 12.5% year over year, respectively. FactSet added 281 clients in the reported quarter, driven by an increase in corporate and wealth management clients, and third-party data providers, taking the total to 6,453. Annual client retention rate was 91%. At the end of the quarter, total employee count was 10,892, up 3.9% year over year.

Operating Results

Adjusted operating income came in at $130.4 million, up 2.4% from the year-ago quarter’s figure. Adjusted operating margin decreased to 31.6% from 33.2% in the year-ago quarter. Selling, general and administration expenses decreased 6.2% to $95.2 million. Total operating expenses increased 2.7% to $292.7 million.

Balance Sheet and Cash Flow

FactSet exited the quarter with cash and cash equivalents of $681.9 million compared with $602.7 million in the previous quarter. Long-term debt was $574.7 million compared with $574 million at the end of the prior quarter. In the quarter, the company generated $185 million of cash from operating activities, while capital expenditures were $13.8 million. Free cash flow was $171.2 million.

Fiscal 2022 Outlook

FactSet anticipates adjusted EPS in the range of $12-$12.30.

The company expects revenues between $1.705 billion and $1.720 billion

Organic ASV plus professional services for fiscal 2022 is projected to increase in the range of $105-$135 million over fiscal 2020.

Adjusted operating margin is projected to be of 32.5-33.5%. The annual effective tax rate is expected to be between 14.5% and 15.5%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

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 a D. Following the exact same course, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise FactSet has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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