FactSet Research Systems Inc. Earnings Cheat Sheet: Margins Suffer for Five Quarters Straight, Net Income Climbs

FactSet Research Systems Inc. (NYSE:FDS) reported net income above Wall Street’s expectations for the first quarter. FactSet Research Systems is a provider of integrated global financial and economic information, including fundamental financial data on tens of thousands of companies worldwide.

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FactSet Research Systems Earnings Cheat Sheet for the First Quarter

Results: Net income for FactSet Research Systems Inc. rose to $45.5 million (99 cents per share) vs. $41.6 million (88 cents per share) in the same quarter a year earlier. This marks a rise of 9.5% from the year earlier quarter.

Revenue: Rose 13.4% to $196.4 million from the year earlier quarter.

Actual vs. Wall St. Expectations: FDS reported adjusted net income of $1.10 per share. By that measure, the company beat the mean estimate of $1 per share. Analysts were expecting revenue of $197.2 million.

Quoting Management: Philip Hadley, Chairman and CEO said, “Our earnings results in the first quarter demonstrate the strength of FactSet’s business model. We again delivered double digit growth for both revenues and EPS and our free cash flow reached a first quarter record high. Volatility in the financial markets interrupted short-term buying patterns from our clients, dampening our ASV growth this quarter.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 13.3%, with the biggest boost coming in the third quarter of the last fiscal year when revenue rose 14.6% from the year earlier quarter.

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 1.3 percentage points to 66% from the year earlier quarter. Over that time, margins have contracted on average 1.4 percentage points per quarter on a year-over-year basis.

The company has now seen net income rise in three straight quarters. In the fourth quarter of the last fiscal year, net income rose 4% and in the third quarter of the last fiscal year, the figure rose 12%.

The company topped expectations last quarter after falling short of forecasts in the fourth quarter of the last fiscal year with net income of 88 cents versus a mean estimate of net income of 95 cents per share.

Looking Forward: Expectations for the company’s next quarter performance are higher than they were ninety days ago. Over the past three months, the average estimate for the second quarter has risen to $1.02 per share from $1.01. For the fiscal year, the average estimate has moved up from $4.16 a share to $4.17 over the last ninety days.

Competitors to Watch: MSCI Inc. (NYSE:MSCI), Morningstar, Inc. (NASDAQ:MORN), Thomson Reuters Corp. (NYSE:TRI), EDGAR Online, Inc. (NASDAQ:EDGR), The McGraw-Hill Companies, Inc. (NYSE:MHP), Envestnet, Inc. (NYSE:ENV), IHS Inc. (NYSE:IHS), News Corporation (NASDAQ:NWSA), JPMorgan Chase & Co. (NYSE:JPM), and Lehman Brothers Hldgs. Inc. (LEHMQ).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)