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FactSet Research Systems Inc. (NYSE:FDS) is set to report fiscal first-quarter 2018 results on Dec 19. Last quarter, the company delivered a positive earnings surprise of 0.53%. Notably, the stock has surpassed the Zacks Consensus Estimate in all the trailing four quarters. It has an average positive earnings surprise of 1.14%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
FactSet, a provider of global online integrated data-related products and services for the investment community (primarily bankers, investment managers and brokerage firms), is consistent with product innovation, which is a positive for its top line. According to technavio, the Global Business Information market is projected to witness CAGR of 5.2% from 2017 to 2021 and we expect the company to enjoy the growth prospects.
Moreover, the company’s acquisitions of Portware, Revere Data, Matrix Data, Code Red and BISAM Technologies S.A are anticipated to enhance its product suite and aid it to evolve as a global financial database company.
However, the company is suffering from a declining client-retention ratio. During fourth-quarter 2017, the retention ratio came in at 91%, tanking 300 basis points (bps) from the year-ago quarter and 100 bps from the previous quarter. Although the company has been adding new clients every quarter, its failure to retain existing clients is a concern.
Moreover, the company caters to a highly competitive industry. With prominent peers such as Bloomberg L.P., Dow Jones & Company Inc. and Thomson Reuters (TO:TRI) , competition is expected to intensify. While FactSet has a technological advantage, some of these competitors have greater financial, technical and marketing resources.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
FactSet has an Earnings ESP of +0.14% and a Zacks Rank #4 (Sell).
Stocks to Consider
Here are a couple of stocks that you may consider, as our model shows that they have the right combination of elements to post an earnings beat:
AppFolio, Inc. (NASDAQ:APPF) , with an Earnings ESP of +44.44%, and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Broadcom Limited (NASDAQ:AVGO) , with an Earnings ESP of +1.02% and a Zacks Rank #1.
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