FactSet (FDS) Stock Gains 2% Following Q2 Earnings Beat
FactSet Research Systems, Inc.'s FDS second-quarter fiscal 2023 (ended Feb 28) witnessed mixed results, with earnings beating the Zacks Consensus Estimate but revenues missing the same.
The mixed results helped the company's shares gain 1.8% since the release on Mar 23.
Non-GAAP earnings per share (excluding 42 cents from non-recurring items) of $3.8 beat the consensus mark by 4.1% and grew 16.2% from the year-ago quarter’s reported figure. Revenues of $515.1 million missed the Zacks Consensus Estimate by a slight margin but increased 19.5% from the year-ago quarter’s reported figure.The revenue increase on a year-over-year basis was mainly due to the addition of CUSIP Global Services, and better sales performance in Content, Technology, Analytics & Trading solutions.
FactSet Research Systems Inc. Price, Consensus and EPS Surprise
FactSet Research Systems Inc. price-consensus-eps-surprise-chart | FactSet Research Systems Inc. Quote
Revenues in Detail
Organic revenues increased 8.9% year over year to $469.5 million. Region-wise, organic revenue growth from the Americas, EMEA and the Asia Pacific was 8.2%, 8.2% and 15.3%, respectively.
ASV Plus Professional Services
FactSet’s Annual Subscription Value (ASV) plus professional services were $2.1 billion, up 16.7% year over year. Organic ASV plus professional services were $1.9 billion, up 9.1% from the prior-year quarter. Buy-side and sell-side organic ASV growth rates were 8.1% and 15.8%, respectively. Nearly 83% of organic ASV was generated by the buy-side and the rest by sell-side firms.
Organic ASV generated from the United States was $1.2 billion, up 9.3% from the prior-year quarter. Organic ASV from EMEA and the Asia Pacific were $494.3 million and $195.6 million, up 8.1% and 10.8% year over year, respectively.
FactSet added 99 clients in the reported quarter, driven by an increase in corporate and wealth clients, taking the total to 7,730. The annual client retention rate was 92%. At the end of the said quarter, the total employee count was 11,896, up 10.3% from the figure registered in the last 12 months, driven primarily by an increase in content, analytics and trading, and sales organizations.
Operating Results
Adjusted operating income was $190.7 million, up 31.4% from the year-ago quarter’s reported figure. The adjusted operating margin increased to 37% from 33.7% in the year-ago quarter.
Balance Sheet and Cash Flow
FactSet exited the quarter with a cash and cash equivalent balance of $445.33 million compared with $437.1 million in the previous quarter. Long-term debt was $1.74 billion compared with the prior quarter’s figure of $1.9 billion. In the reported quarter, FDS generated $164.7 million of cash from operating activities, while capital expenditure was $17.4 million. Free cash flow was $147.2 million.
Updated FY23 Outlook
FactSet reduced its revenue guidance for fiscal 2023. GAAP revenues are expected to be $2.08-$2.1 billion (previously $2.1-$2.12 billion). The mid-point of the guided range ($2.09 billion) is in line with the Zacks Consensus Estimate. The adjusted operating margin is expected to be 29.5-30.5% (previously 34-35%). FactSet's annual effective tax rate is expected to be 13.5-14.5%.
Adjusted EPS is expected to be $14.5-$14.9. The mid-point of the guided range ($14.7) is below the Zacks Consensus Estimate of $14.85.
FactSet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The following stocks from the Business Service sector reported better-than-expected fourth-quarter results.
Gartner, Inc. IT, with a Zacks Rank #2 (Buy), reported better-than-expected fourth-quarter 2022 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings (excluding 49 cents from non-recurring items) per share of $3.70 beat the Zacks Consensus Estimate by 44% and increased 23.8% year over year. IT revenues of $1.5 billion beat the Zacks Consensus Estimate by 2.6% and improved 15.2% year over year on a reported basis and 20% on a foreign-currency-neutral basis.
Aptiv PLC APTV, carrying a Zacks Rank of 3, reported better-than-expected fourth-quarter 2022 results. Adjusted earnings (excluding 41 cents from non-recurring items) of $1.27 per share beat the Zacks Consensus Estimate by 6.7% and increased more than 100% on a year-over-year basis. APTV’s revenues surpassed the Zacks Consensus Estimate by 6% and increased 12.2% year over year.
EquifaxEFX, with a Zacks Rank of 3, reported stellar fourth-quarter 2022 results. The company’s earnings and revenues surpassed the Zacks Consensus Estimate. EFX’s adjusted earnings of $1.52 per share beat the Zacks Consensus Estimate by 2.7% but decreased 17.4% on a year-over-year basis. Revenues of $1.2 billion beat the Zacks Consensus Estimate by 1.5% but decreased 4.4% year over year.
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