Can FactSet Give Bloomberg A Run For Its Money?
FactSet Research Systems Inc. (NYSE:FDS) is a provider of global financial and economic information including fundamental data on tens of thousands of companies worldwide. FactSet supports the investment process from initial research to published results for buy- and sell-side professionals including portfolio managers, research analysts, risk managers, investment bankers and fixed income professionals.
The company sports a $4.3 billion market cap, a 0.99% dividend and has beaten estimates in ten of the past twelve quarters.
Earnings: 1Q profit of $41.6 million ($0.88/share) vs. 1Q09 profit of $36.1 million ($0.74/share). Profit during the most recent Q was buoyed by $0.03/share in income tax benefits.
Revenue: Up 12% YoY to $173.3 million.
Actual vs. Wall St. Expectations: FDS beat consensus EPS estimates by $0.04/share and came in in-line in terms of revenue.
Notable Stats: FactSet issued 2Q EPS guidance of $0.85-$0.87/share vs. estimates of $0.86/share and revenue guidance of $174-$179 million vs. esitmates of $176 million. FY2011 capex guidance came in at $22-$28 million.
FDS added 800 customers during 1Q, bringing its total customer base to 43,600. The company’s client count increased by 13 to 2,123.
Operating income increased 10% YoY to $59.4 million vs. 1Q09 operating income of $54.0 million.
Operating margins narrowed to 34.3% from 34.8% due to higher costs.
Did You Hear That? Chairman and CEO Philip A. Hadley noted during the call that FDS’ “first quarter results illustrate the strength of FactSet’s business model. [FDS] continues to be able to provide superior workflow solutions to clients and grow both our ASV and EPS.” He added that FDS “again delivered strong ASV growth, adding $11 million over the past three months while EPS was up 15%.”
Competitors to Watch: MSCI Inc. (NYSE:MSCI), Thomson Reuters Corporation (NYSE:TRI), Morningstar, Inc. (NASDAQ:MORN), EDGAR Online, Inc. (NASDAQ:EDGR), and The McGraw-Hill Companies, Inc. (NYSE:MHP).
Technicals: Since breaking above $78.83 on September 3rd, shares of FDS have gained nearly 19%. The company’s 50-day moving average is above its 200-day line and both are upward-sloping. While volume was high during the post-earnings selloff, stabilization in shares indicates that institutional investors are in large part remaining behind the FDS story. A pullback to the 50-day line may be in the cards in the coming days, particularly if the market falls prey to general weakness. If shares can hold that marker, a bounce upward may be a good entry-point for those looking to open a position.
Commentary: FactSet is one of the few competitors to the ubiquitous Bloomberg terminals that pepper much of Wall St. in addition to offices around the world. 82% of the company’s revenue is derived from buy-side clients, with the remainder coming from sell-side firms, generally those performing M&A advisory or equity research. Shares fell as much as 4% following last week’s report, but given the steep rise that the stock has enjoyed over the past few months, such a dip should not be interpreted as a cause for great concern.
Analysts at S&P maintained their Hold rating, asserting that “cancellations have slowed [and] client work forces have stabilized.” They lifted their 12-month target price by $13 to $101.
In the end, FactSet does not need to unseat Bloomberg to continue to enjoy great success. Rather, the company merely needs Wall St. revenue streams to continue to expand. Those of you who would like to play the health of the financial sector without having to attempt to value a zombie bank may find FDS to be an interesting derivative play on the space.
Disclosure: No holdings in FDS.