We issued an updated research report on FactSet Research Systems Inc. FDS on Dec 29, 2015 after the company posted lower-than-expected first-quarter fiscal 2016 results on Dec 15.
Adjusted earnings per share of $1.44 missed the Zacks Consensus Estimate of $1.46 and revenues $270.5 million fell short of the Zacks Consensus Estimate of $273 million.
Nonetheless, year-over-year comparisons on both the counts were favorable. FactSet’s revenues and adjusted earnings improved 11.5% and 9.1% year over year, respectively.
Higher-than-expected growth across products and geographic regions positively impacted quarterly revenues. Also, synergies from the acquisitions completed within the last 12 months and positive impact of foreign currency aided revenues.
FactSet continues with product innovation across segments with special emphasis on financial services to expand the customer base. Moreover, the Revere Data, Matrix Data and Code Red buyouts will help it to deliver innovative products and evolve as a global financial database company. FactSet will also be able to maximize value for its partners and provide exclusive content sets.
FactSet is witnessing growth in its Annual Subscription Value (ASV), driven by client additions. We believe that the growing customer base, high client retention rate (95% of ASV) and a competitive pricing strategy will boost revenues in the long haul.
Going forward, regular buybacks are expected to support earnings per share and boost shareholders’ value.
Nonetheless, competition from Bloomberg, Dow Jones & Company Inc., MSCI Inc. MSCI and Thomson Reuters Corp. TRI, which are coming up with substitute products at competitive prices, remains a headwind.
Currently, FactSet carries a Zacks Rank #3 (Hold). A better-ranked stock in the broader technology sector is CEVA Inc. CEVA sporting a Zacks Rank #1 (Strong Buy).
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