Factset Research Systems Slips On Solid Results
The price action in Factset Research Systems (NYSE: FDS) underwent a correction over the past few months but it looks like that time is now behind us. The correction was due to uncertainty over the future, uncertainty over acquisition, and no small amount of profit-taking. During that time the institutions helped drive volatility and ultimately put a bottom in price action. Institutional activity in Q1 is worth more than 10.5% of the market cap with shares trading near $425 and double the amount traded in the previous quarter. More importantly, the net of activity is bullish in the amount of $0.3 billion or about 1.3% of the market cap and that bias is can be clearly seen in the price action. The stock formed a Head & Shoulders reversal pattern in tandem with the uptick in the activity and the market is now confirming the reversal. The question now is where will this reversal go?
Factset Research Systems Reports Refreshing Results
Factset Research Systems had a good quarter in many ways but the detail that sticks out to us is that revenue gains are organic and not tied to price increases. The company reports $431.1 million in net income for a gain of 10.0% over last year, 9.9% organic, with demand on the rise in all operating regions. The European market grew the least but still delivered a solid 7.8% increase while the Americas grew by 9.4% and Asia by 14.3%. Looking forward, the organic ASV+professional services grew by 9.4% as well and suggest growth will continue into the end of the fiscal year if not longer.
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Moving down, the margin news is mixed but ultimately bullish. The GAAP operating margin declined by 100 basis points YOY due to acquisition and the closure of office space but the shrinkage was expected. On an adjusted basis, however, the operating margin expanded by 110 basis points and helped drive earnings well above forecast. In both cases the margin was better than expected and drove leverage gains on the bottom line. The GAAP EPS of $2.84 is up 13.6% versus last year while the adjusted EPS is up 20.7% and beat the consensus by $0.30.
The company is expecting to see organic strength continue into the end of the year and provided favorable guidance. The guidance is, however, bracketing the consensus estimate so did not provide the catalyst to share prices that it could have done. Regardless, the company is expecting to see EPS in a range of $12.75 to $13.15 compared to the $13.01 consensus, a range that allows for an upside surprise and we see upside risk as well. The company’s services are in high demand due to increasingly volatile markets, both business and investment, and we don’t see that situation changing soon.
The Analysts May Cap Gains In Factset Research Systems
The analysts have yet to come out with commentary on Factset Research Systems’ Q2 results and that may cap gains in the near term. There are 11 analysts rating the stock a firm Hold with a price target equal to recent price action. This may sap sentiment from the market but also provides a potential catalyst should the analysts decide to issue a positive statement.
The Technical Outlook: Factset Research Systems Is In Reversal
Price action in Factset Research Systems has already traced out a textbook Head & Shoulders bottom and broken above the neckline. Price action is now moving back to test support at the neckline and support appears to be present. Assuming the market maintains price action above the $420 level and the short-term moving average, we see this stock consolidating and moving sideways if not higher. Resistance is at the $440 level, a break above there would be very bullish. If, however, the support fails at the $420 level a move down to $410 or $405 is likely.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| FactSet Research Systems (FDS) | $483.52 | -1.3% | 0.86% | 34.79 | Reduce | $453.69 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
