It has been about a month since the last earnings report for FactSet Research (FDS). Shares have lost about 4.7% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is FactSet due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
FactSet’s Q3 Earnings Miss Estimates
FactSet Research Systems has reported the results for the third quarter of fiscal 2025, with earnings missing the Zacks Consensus Estimate but revenues surpassing the same.
FDS’s earnings per share of $4.27 missed the consensus mark by a slight margin and decreased 2.3% from the year-ago quarter. Revenues of $585.5 million beat the Zacks Consensus Estimate by a slight margin and gained 5.9% from the year-ago quarter.
FactSet’s Revenues in Detail
Organic revenues increased 4.4% year over year to $577.2 million. Region-wise, organic revenue growth was 5% for the Americas, 2.3% for the EMEA and 6.4% for the Asia Pacific.
Revenues generated from the Americas segment were $380.5 million, up 6.7% from the year-ago quarter, surpassing our estimate of $374.8 million. Revenues from the EMEA were $145.7 million, an increase of 3.1% from the year-ago quarter. The figure missed our projection of $147.2 million. Revenues from the Asia Pacific were $59.3 million, marking 7.8% growth on a year-over-year basis, outpacing our estimate of $58.4 million.
FDS’s ASV Plus Professional Services
FactSet’s Annual Subscription Value (“ASV”) plus professional services were $2.3 billion. Organic ASV plus professional services were $2.3 billion, up 4.5% from the year-ago quarter. The buy-side and the sell-side organic ASV growth rate was 4%. Nearly 82% of organic ASV was generated by the buy-side and the rest by sell-side firms.
Organic ASV generated from the United States was $1.4 billion, increasing 5% from the year-ago quarter. Organic ASV from the EMEA was $575.2 million, gaining 2.1% year over year. Organic ASV from the Asia Pacific was $235.7 million, up 7.1% on a year-over-year basis.
FactSet added 166 clients in the third quarter of fiscal 2025, driven by hedge fund, corporate, and wealth management clients and clients from the LiquidityBook acquisition, taking the total to 8,811. The annual client retention rate was 91%.
Operating Results for FDS
The adjusted operating income was $194.2 million, which decreased 4.1% from the year-ago quarter and beat our estimate of $191.3 million. The adjusted operating margin of 36.8% declined 260 basis points from the year-ago quarter.
FactSet’s Balance Sheet & Cash Flow
The company exited the quarter with a cash and cash-equivalent balance of $356.4 million compared with $278.5 million in the second quarter of fiscal 2025. The long-term debt was $1.4 billion compared with $1.5 billion in the preceding quarter.
FDS generated $253.8 million in cash from operating activities. However, its capital expenditure was $25.2 million. The free cash flow utilized was $228.6 million.
FY25 Guidance for FDS
For fiscal 2025, the company anticipates revenues of $2.305-$2.325 billion. FDS anticipates earnings per share of $16.8-$17.4. The adjusted operating margin is projected to be 36-37%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, FactSet has a average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a score of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, FactSet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
FactSet Research Systems Inc. (FDS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
