FactSet Research Systems Pulls Back On Mixed Results

Resilient FactSet Research Systems Accelerates Growth

FactSet Research Systems NYSE: FDS results over the past year proved the resiliency of the stock market if nothing else. The company provides all manner of research for investors both sell-side and buy-side and at no time did its revenue falter. At the peak of the crisis, FactSet Research Systems Revenue growth slowed to the 2% range but it has accelerated in the time since and on track to continue growing over the next year. 

Factset Research System Q3 Results, Look Past The Headlines

FactSet Research Systems had a mixed quarter but there is a mitigating factor that makes the Miss irrelevant. The company beat top-line estimates but fell short on the earnings end by a slim margin. It's not the slim margin we're paying attention to but the reason for the miss which is increased CAPEX spending. The company has accelerated its growth plans which for us only means greater revenue and greater earnings in future quarters. So, do we want to see the company miss its consensus estimates? No, but our reaction to the news depends on why the company missed, and in this case, it's a good reason.

FactSet Research Systems reported $399.6 million in net consolidated revenue. This beat the consensus estimate by 50 basis points and is good or 6.8% YoY growth. The revenue was up 2% sequentially, and 9.6% over the two-year period proving that growth is not only sustained but accelerating. On an organic basis, revenue grew 5.9% due primarily to higher sales of analytics and Content & Technology Solutions. The annual subscription value for ASV, the forward projection of Revenue based on current business, grew 5.8% on an adjusted basis and points to growth in the coming quarter as well. On a segment basis, ASV gains were strongest in the Asia-Pacific region at 9.1% with slightly smaller gains in North America and Europe/The Middle East.

Moving down the report, the company reported a 300 basis point decline in the operating margin which was due primarily to higher spending in regards to the multi-year investment plan. On the bottom line, the GAAP EPS of $2.62 is down 50 basis points from the prior year and missed the consensus estimates by a few pennies while the adjusted EPS fell 4.9% to  $2.72. Looking forward, the company increased its guidance for full-year ASV while maintaining guidance for other metrics which is in line with the current results. Revenue growth was offset by CAPEX spending on the bottom line. 

FactSet Returns Cash To Shareholders Too

FactSet Research System is not only investing in future growth but also returning capital to shareholders. The company repurchased over 178,000 shares of its stock during the past quarter for roughly $57.60 million. That's worth about 0.5% of the market cap and there is still $292.40 Or 2.3% of the market cap available under the repurchase program. And there is a dividend too. The yield is a little low at 1% but the payout is safe and there is a high expectation for aggressive increases. The company has been increasing the distribution for 22 years at a double-digit CAGR and has a low  30% payout ratio and strong balance sheet.

The Technical Outlook: FactSet Research Systems Is Range-Bound

Shares of FactSet Research Systems are down more than 1% in the wake of the earnings release. Although market action is bearish, price action is well within a range of support and should be expected to move sideways rather than down. The support is near the $330 level and the short-term moving average so should be fairly strong. If this level fails to hold up as support price action may fall as far as $300 before bouncing.