Shares of FactSet Research Systems Inc. FDS scaled a new 52-week high of $232.23 during the trading session on Sep 4, before closing a tad lower at $232.16.
The company’s shares have charted a solid trajectory in recent times, appreciating 20.4% year to date, ahead of the 19.2% rise of the industry it belongs to.
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Notably, the company has witnessed a 17.8% rise in share price since it posted strong third-quarter fiscal 2018 results.
Let’s find out what’s supporting the rally.
Solid Revenue Growth
FactSet’s top line is driven by higher sales of analytics products, content and technology solutions (CTS) and wealth management solutions along with an international price increase.
Growth across FactSet’s risk offering and fixed income and equity products boosts its analytical suite. CTS look strong on the back of the recently launched Open FactSet Marketplace platform, which offers both core financial and alternative data sets. The company’s wealth management business is performing well with workstation deployments across top tier clients.
In third-quarter fiscal 2018, total revenues grew 8.9% year over year to $339.9 million. Organic revenue growth was 5.7%, with 5% in the United States and 6.9% internationally.
Higher Annual Subscription Value
Growth in Annual Subscription Value (ASV) reflects the rise in revenues from FactSet’s subscription services. In third-quarter fiscal 2018, FactSet’s ASV increased 6.3% year over year to $1.36 billion. Organically, it increased $9 million during the quarter.
Region wise,FactSet’s ASV generated $843.6 million revenues from the United States, up 4.4% from the prior-year quarter as well as organically. Internationally, it came in at $512.6 million revenues, up 8.1% on a reported basis and 6.7% organically. While 13% growth was observed from the Asia-Pacific region, Europe grew at a rate of 5%.
Additionally, the company added 80 new clients in third-quarter fiscal 2018, taking the total to 4,975. The client retention rate was 90%.
Expanding Global Footprint
FactSet’s expanding global presence has been contributing to its top line.
Revenues from the Asia Pacific region grew 14.1% year over year in third-quarter fiscal 2018 due to increase in new business with asset managers (related to risk analytics products) and higher sales to existing clients. The region witnessed new client addition and higher sales to existing clients particularly in Singapore and Australia in the said quarter. Growth across both fixed income and equity products and CTS products were the catalysts. Opening of a new office in Shanghai further raises optimism about FactSet’s growing presence in the Chinese market.
European revenues rose 13.2%, with gains from acquisitions (which has significant operations in the European markets), analytics, CTS, increase in workstation sales and international price increase. The UK and Nordic regions reported robust performance. Collectively, FactSet earns 38.1% of revenues from its international operations.
Raised Earnings Guidance for Fiscal 2018
FactSet raised its fiscal 2018 guidance for adjusted earnings per share (EPS). The company now expects adjusted EPS in the range of $8.37-$8.62 compared with $8.35-$8.55 expected earlier. The midpoint of the adjusted EPS range reflects 16% year-over-year growth.
Zacks Rank & Stocks to Consider
Currently, FactSet carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some other top-ranked stocks in the broader Business Services sector include Heidrick & Struggles International HSII, BG Staffing BGSF and Genpact G. While Heidrick & Struggles International sports a Zacks Rank #1, BG Staffing and Genpact carry a Zacks Rank #2.
The long-term expected EPS (three to five years) growth rate for Heidrick & Struggles International, BG Staffing and Genpact is 13.5%, 20% and 10%, respectively.
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