FactSet (FDS) To Gain From Strategic Initiatives, Risks Persist

We issued an updated research report on FactSet Research Systems Inc. (NYSE:FDS) on Jun 30, after the company posted strong third-quarter fiscal 2016 results on Jun 28.

FactSet’s third-quarter adjusted earnings per share of $1.64 came ahead of the Zacks Consensus Estimate of $1.63. Reported earnings also improved on a year-over-year basis mainly on the back of a strong top-line performance and a lower share count.

FactSet’s revenues of $287.5 million increased 13% from the year-ago quarter and were almost line with the Zacks Consensus Estimate of $288 million. Moreover, reported revenues were within management’s guided range of $286 million to $289 million.

FactSet witnessed better-than-expected growth across products and geographic regions which aided its quarterly revenues. Also, synergies from acquisitions completed within the last 12 months contributed to top-line growth.

The company continues to focus on product innovation across segments with a special emphasis on financial services to expand the customer base. Moreover, the Revere Data, Matrix Data and Code Red buyouts will help it to come up with innovative products and evolve as a global financial database company. FactSet will also be able to maximize its partners’ value and provide exclusive content sets.

Meanwhile the company is witnessing growth in its Annual Subscription Value (ASV) driven by client additions. We believe that the growing customer base, high client retention rate (95% of ASV) and a competitive pricing strategy will boost revenues over the long haul.

Going forward, regular share buybacks will support the bottom line and boost shareholders’ value.

On the flip side, competition from the likes of Bloomberg, Dow Jones & Company Inc., MSCI Inc. (NYSE:MSCI) and Thomson Reuters (TO:TRI) , which are all launching products at competitive prices, is a significant headwind for the company.

Currently, FactSet carries Zacks Rank #3 (Hold). A better-ranked stock in the Business Information Services industry is The Dun & Bradstreet Corporation (NYSE:DNB) , carrying a Zacks Rank #2 (Buy).