Factset Research Systems, Going Parabolic And Gaining Momentum

Factset Research Systems Hits Another New All-Time High 

Factset Research Systems NYSE: FDS has a strong fundamental story that is driving its share prices higher. Factset Research Systems also has a strong technical story that is pointing not only to higher highs but an acceleration of sentiment that could sustain this rally to another substantial double-digit gain in share prices. 

“I’m pleased to report that FactSet once again delivered impressive quarterly results, reflecting the continuing momentum in our business,” said Phil Snow, CEO, FactSet. “It is clear that the investments we have made in our business are paying off in top-line growth. Demand for differentiated content remains strong, which we intend to capitalize on with our leading open content and analytics platform.”

While the technical picture is strong in all three of the time frames we watch (daily, weekly, and monthly) it is particularly strong in the long-term monthly view. On this chart, we are noting a strong uptrend with convergent and extreme momentum peaks consistent with a strong and strengthening market with several quarters of upward movement ahead of it. Factset Research Systems will surely correct and consolidate during the next few quarters, any time it does will be a good time to buy more shares. 

Factset Research Systems Beats On Top And Bottom Lines 

Factset Research Systems had a great fiscal Q1 driven by organic and acquisition growth over the past two years. The company reported $424.7 million in consolidated revenue for a gain of 9.4% over last year and 15.8% over the same time frame in 2019. The revenue also beat the Marketbeat.com consensus by 125 basis points and internals point to continued strength in the current quarter. On an organic basis, growth is up 9.1% with a 9.2% increase in ASV. 

Moving down, there was some pressure on the margins but less than expected. The GAAP operating margin contracted by 230 basis points while the adjusted margin held up better with only a 70 bps contraction. On the bottom line, the GAAP $2.79 is up 6.5% from last year but missed the consensus by $0.07 due to restructuring and real estate costs. On an adjusted basis the $3.25 in earnings is up 12.8% from last year and beat by a quarter dollar. 

Looking forward, the company reiterated its guidance for this year’s growth. The guidance brackets the consensus estimate for both revenue and earnings growth with the consensus estimate in the lower quadrant. This not only paves the way for outperformance but also leaves the door open to outperformance and does not include the impact of a recent acquisition. The company just announced the purchase of CUSIP Global from S&Pfor $1.925 billion, a deal that should be accretive upon closure. 

The Technical Outlook: Index-Buying Is Driving Factset Higher 

Not only is Factset Research Systems supported by its fundamental and acquisitional growth story but there is the recent addition to the S&P 500 to consider. This addition means every ETF and mutual fund that tracks the S&P 500 and/or Factset Research System’s sector or industry will have to buy the stock. This could result in billion of activity and it has only just started. In our view, the technical indications on the monthly chart are enough to drive this market up another $100 to $185 dollars and that is assuming the stock is near a top/consolidation point now. The analyst activity has been bullish in the wake of the report and includes the new Marketbeat.com high price target of $550 or about 15% above recent action.