Last week, you might have seen that FactSet Research Systems Inc. (NYSE:FDS) released its quarterly result to the market. The early response was not positive, with shares down 2.3% to US$265 in the past week. Revenues were US$367m, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$2.43 were also better than expected, beating analyst predictions by 11%. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from FactSet Research Systems's 16 analysts is for revenues of US$1.51b in 2020, which would reflect a reasonable 4.2% increase on its sales over the past 12 months. Statutory earnings per share are forecast to shrink 2.7% to US$9.26 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$1.50b and earnings per share (EPS) of US$9.20 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
Analysts reconfirmed their price target of US$240, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic FactSet Research Systems analyst has a price target of US$278 per share, while the most pessimistic values it at US$185. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that FactSet Research Systems's revenue growth is expected to slow, with forecast 4.2% increase next year well below the historical 9.0%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.4% next year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting FactSet Research Systems to grow at about the same rate as the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple FactSet Research Systems analysts - going out to 2024, and you can see them free on our platform here.
You can also see whether FactSet Research Systems is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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