On Monday, RBC (TSX:RY) Capital maintained its Sector Perform rating and $464.00 price target on shares of FactSet Research Systems (NYSE:FDS).
The firm recognized the company's ability to navigate headwinds better than anticipated in the third quarter of 2024, specifically noting a smaller than expected impact from the CS-UBS ASV (Annual Subscription Value), which was a significant concern for investors.
FactSet's recent performance has been bolstered by the acquisition of two new clients, which is particularly notable given the current challenging economic climate. This success is indicative of FactSet's robust value proposition and its strong position in a competitive market.
Despite these positive developments, RBC Capital expressed caution regarding FactSet's implied Annual Subscription Value (ASV) guidance for the fourth quarter of 2024, which suggests an increase of 4.75% at the midpoint. RBC Capital cautions that this target may be overly optimistic considering factors such as restricted client budgets, lengthier sales cycles, and a smaller pool of banking analysts entering the workforce.
Looking ahead into the 2025 fiscal year, RBC Capital anticipates potential challenges for FactSet's profit margins. The company is expected to invest in three strategic areas, which could lead to margin declines similar to those experienced during the investment cycle between fiscal years 2020 and 2022. FactSet's management strategies and investment priorities will be critical factors in determining the company's financial performance in the upcoming fiscal year.
FactSet Research Systems reported its third-quarter fiscal 2024 earnings, showing a robust performance despite market adversities. The company's organic Annual Subscription Value (ASV) and professional services experienced a 5% growth, with adjusted diluted earnings per share (EPS) escalating to $4.37. FactSet managed to achieve an adjusted operating margin of 39.4%. Further developments include FactSet's client base expansion to 8,029, with nine new logos added.
FactSet also repaid $62.5 million of its term loan, reducing gross leverage to 1.7 times, and paid a quarterly dividend of $1.04 per share, marking a 6% increase. Looking ahead, FactSet's revenue projections range between $2.18 billion and $2.19 billion, with an adjusted EPS expected to range from $16 to $16.40.
The company anticipates annual organic ASV plus professional services growth between 4% and 5.5%.
Deutsche Bank (ETR:DBKGn) maintained a Hold rating on FactSet while slightly raising the price target to $461 from $457. The bank's analysts pointed to the company's stable gross new sales and cost management measures as positive indicators.
InvestingPro Insights
As FactSet Research Systems (NYSE:FDS) continues to demonstrate resilience in a challenging economic environment, it's worth noting that the company has a track record of consistent dividend payments, having raised its dividend for 25 consecutive years. This commitment to shareholder returns is complemented by a strong financial performance, with a market capitalization of $16.15 billion and a Price/Earnings (P/E) ratio of 31.96, reflecting investor confidence in the company's profitability and market position.
InvestingPro data shows a steady revenue growth of 6.23% over the last twelve months as of Q3 2024, which may lend support to the company's strategic investments and its ability to attract new clients even in tough economic times. However, analysts have revised their earnings expectations downwards for the upcoming period, suggesting that investors may need to temper their expectations for near-term growth.
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