FactSet (FDS) Stock Touches 52-Week High: What's Driving It?
Shares of FactSet Research Systems Inc. FDS scaled a 52-week high of $351.96 in the trading session on Jul 10, before closing a tad lower at $350.98.
The company’s shares have charted a solid trajectory in recent times, appreciating 30.8% year to date, ahead of 13.5% growth of the industry it belongs to.
Notably, FactSet has witnessed a 7.4% rise in share price since it posted third-quarter fiscal 2020 results.
Let’s find out what’s supporting the uptick.
Shareholder-Friendly Moves
Although many companies across diverse sectors have suspended dividend payouts and share buybacks amid the coronavirus crisis, FactSet remains one of those few that are sailing through the tough economic time and maintaining dividend payouts and share repurchases.
On Mar 24, 2020, the company’s board of directors approved a $220 million increase in its existing share repurchase program. Additionally, on May 5, 2020, the company’s board approved a 7% dividend hike, raising the quarterly cash dividend from 72 to 77 cents per share. This marks the fifteenth consecutive year of dividend hike. The dividend was paid on Jun 18, 2020, to holders on record at the close of business on May 29, 2020.
Factset has a track record of consistent share repurchases and dividend payments. In fiscal 2019, the company repurchased shares worth $220.4 million and paid out dividends of $100.1 million. During fiscal 2018, the company repurchased shares worth $303.9 million and paid out dividends worth $89.4 million. In fiscal 2017, the company repurchased shares worth $260.9 million and paid dividends worth approximately $80.9 million.
Consecutive Earnings Beat
FactSet came up with better-than-expected earnings performance in the last six quarters. The encouraging performance can be attributed to strength in the company’s operating results and lower tax rate. Notably, the company’s updated fiscal 2020 guidance for adjusted operating margin and annual effective tax rate are encouraging.
Updated Fiscal 2020 Outlook
FactSet updated its fiscal 2020 outlook from what was provided on Sep 26, 2019.
The company now anticipates adjusted EPS in the range of $10.4 and $10.6, compared with the previous guidance of $9.85 to $10.15. The Zacks Consensus Estimate of $10.52 lies within the current guided range.
Adjusted operating margin is projected in the range of 33%-33.5%, compared with the previous projection of 31.5%-32.5%. The annual effective tax rate is expected between 15.5% and 16.5%, compared with the previous projection of 17%-17.5%.
Strategic Acquisitions Bode Well
Acquisitions have been acting as a growth catalyst for FactSet. The most noticeable acquisitions include the buyout of BISAM, IDMS, Portware LLC, Code Red, Revere Data LLC, StreetAccount, etc. These acquisitions are aimed at helping FactSet broaden its product suite, thereby enabling it to deliver innovative products and evolve as a global financial database company. It will also help FactSet maximize value for its partners and provide customers with exclusive content sets. Notably, the acquisitions of BISAM and IDMS have increased the company’s international footprint, particularly in Europe. We believe the buyouts have been boosting international ASV contribution to the company’s total ASV, which came in at 37.6% in fiscal 2019, in line with that of fiscal 2018 but higher than 37.3% in fiscal 2017.
Zacks Rank and Other Stocks to Consider
FactSet currently carries a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the broader Zacks Business Services sector are DocuSign DOCU, SailPoint Technologies Holdings, Inc. SAIL and ManpowerGroup MAN. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term expected earnings per share (three to five years) growth rate for DocuSign, SailPoint and ManpowerGroup is 31.2%, 15% and 1.5%, respectively.
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