FactSet Research Systems Inc. FDS reported solid first-quarter fiscal 2021 results, with earnings and revenues topping the Zacks Consensus Estimate. The earnings beat, however, failed to impress investors as the stock has declined 2.3% since the earnings release.
The company reported adjusted earnings per share of $2.88, which surpassed the Zacks Consensus Estimate by 5.1% and increased 11.6% on a year-over-year basis, driven by improvement in operating results.
FactSet’s revenues of $388.2 million surpassed the Zacks Consensus Estimate marginally and increased 5.8% year over year. The uptick was driven by higher sales of analytics, content and technology solutions.
Notably, FactSet’s shares have gained 21.2% year to date against 2.2% growth of the industry it belongs to.
Revenues in Detail
Organic revenues increased 5.1% year over year to $386.7 million. Region-wise, U.S. revenues increased to $244.3 million from $231.3 million in the year-ago quarter. EMEA revenues were $105.8 million compared with $100.8 million in the year-ago quarter. Asia Pacific revenues were $38.1 million compared with $34.5 million in the year-ago quarter.
ASV Plus Professional Services
FactSet’s Annual Subscription Value (“ASV”) plus professional services was $1.56 billion, up 5% organically. Buy-side and sell-side ASV growth rates were 5.1% and 4.4%, respectively. Nearly 84% of organic ASV was generated by buy-side and the rest by sell-side firms performing functions like mergers and acquisitions-advisory work, equity research as well as capital-markets services.
FactSet Research Systems Inc. Price, Consensus and EPS Surprise
FactSet Research Systems Inc. price-consensus-eps-surprise-chart | FactSet Research Systems Inc. Quote
ASV generated from the United States was $958.5 million, up 5.6% from the prior-year quarter’s levels. ASV from EMEA and Asia Pacific regions were $422 million and 156.5 million, up 4.7% and 9.5% year over year, respectively. FactSet added 64 clients in the reported quarter primarily driven by an increase in corporate and wealth management clients, taking the total to 5,939. Annual client retention was 90%. At the end of the quarter, total employee count was 10,622, up 7.7% year over year.
Operating Results
Adjusted operating income came in at $133 million, up 6.6% from the year-ago quarter’s figure. Adjusted operating margin increased to 34.3% from 33.9% in the year-ago quarter. Selling, general and administration expenses increased 10.6% to $79.1 million. Total operating expenses increased 5.5% to $267 million.
Balance Sheet and Cash Flow
FactSet exited first-quarter fiscal 2021 with cash and cash equivalents of $560.1 million compared with $585.6 million in the previous quarter. Long-term debt of $575.5 million compared with $574.3 million at the end of the prior quarter. In the quarter, the company generated $89.3 million of cash from operating activities, while capital expenditures were $18.3 million. Free cash flow was $70.9 million.
Fiscal 2021 Outlook
The company reiterated its fiscal 2021 outlook. It continues to anticipate adjusted earnings per share (EPS in the range of $10.75-$11.15). The Zacks Consensus Estimate for the same is pegged at $11.16.
The company expects revenues between $1.57 billion and $1.585 billion. The Zacks Consensus Estimate for revenues is pegged at $1.58 billion.
Organic ASV plus professional services for fiscal 2021 is projected to increase in the range of $55-$85 million over fiscal 2020.
Adjusted operating margin is projected in the range of 32%-33%. The annual effective tax rate is expected between 15% and 16.5%.
FactSet currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks in the broader Business Services sector are CRA International, Inc. CRAI, Gartner (NYSE:IT), Inc. IT and Insperity (NYSE:NSP), Inc. NSP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Long-term earnings (three to five years) growth rate for CRA International, Gartner and Insperity is estimated at 13%, 13.5% and 15%, respectively.
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