On Friday, BMO (TSX:BMO) Capital Markets adjusted its outlook on shares of FactSet Research Systems (NYSE:FDS), a provider of financial information and analytical software. The firm increased the price target to $521 from the previous $471 while retaining a Market Perform rating on the stock.
The revision followed BMO Capital's attendance at the FactSet Investor Day held in New York City. The analyst gained a deeper appreciation for FactSet's technology solutions and its sales approach to clients. Management at the event reaffirmed their financial guidance for fiscal year 2025 and provided an updated medium-term forecast for fiscal year 2028.
The new forecast suggests a slightly slower annual growth rate compared to previous medium-term goals. However, it indicates an acceleration from current growth levels. FactSet also presented margin expansion targets, projecting an approximate 100 basis points increase from the estimated levels for fiscal year 2025. This target is considered achievable and reflects the company's significant investment efforts.
BMO Capital's decision to raise the price target is based on the application of more current market multiples. This adjustment reflects the firm's recognition of FactSet's market position and potential for growth, as indicated by the company's recent presentations and financial targets.
In other recent news, FactSet Research Systems reported a 4.9% year-over-year revenue increase to $562.2 million with adjusted earnings per share of $3.74. Despite strong results, the company's fiscal 2025 earnings guidance of $16.80-$17.40 per share fell short of Wall Street's projections.
Amid these recent developments, Deutsche Bank (ETR:DBKGn) updated its outlook on FactSet, increasing the price target to $483 from $474, while keeping a Hold rating on the stock. However, Redburn-Atlantic downgraded FactSet's stock from Neutral to Sell, citing concerns over the company's slowing growth and current strategy.
In contrast, firms such as Evercore ISI, Stifel, and RBC (TSX:RY) Capital Markets have set higher price targets for FactSet, reflecting expectations of slightly better revenue growth in the near term. FactSet's organic Annual Subscription Value (ASV) growth slowed to 5.1% in the fourth fiscal quarter, down from 5.4% in the third fiscal quarter.
The company's guidance for organic ASV growth for fiscal year 2025 ranges between 4-6%. FactSet also expects a contraction in operating margins for fiscal year 2025 to 36.5% at the midpoint, a decrease from 37.8% in fiscal year 2024. This anticipated margin squeeze is attributed to higher investments that are not generating proportional returns.
InvestingPro Insights
Following BMO Capital's positive outlook on FactSet Research Systems (NYSE:FDS), recent data from InvestingPro provides additional context to the company's financial position and market performance. As of the latest quarter, FactSet's revenue stands at $2.2 billion, with a modest growth of 5.64% over the last twelve months. This aligns with the company's updated medium-term forecast discussed at the Investor Day, which suggests a slight deceleration but still an acceleration from current levels.
InvestingPro Tips highlight FactSet's strong dividend history, having raised its dividend for 26 consecutive years. This consistent dividend growth, coupled with a current dividend yield of 0.84%, underscores the company's financial stability and commitment to shareholder returns. Additionally, FactSet is trading near its 52-week high, with a robust 21.59% price return over the past three months, indicating strong market confidence in line with BMO Capital's increased price target.
It's worth noting that FactSet's P/E ratio stands at 35.15, which InvestingPro categorizes as high relative to near-term earnings growth. This valuation metric may be of interest to investors considering BMO Capital's Market Perform rating and the company's projected growth trajectory.
For readers interested in a deeper dive into FactSet's financials and market position, InvestingPro offers 11 additional tips, providing a comprehensive analysis of the company's strengths and potential challenges.
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