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On Monday, BMO Capital Markets adjusted its outlook on FactSet Research Systems (NYSE:FDS), reducing the price target from the previous $498.00 to $466.00. Despite the downward revision, the firm maintained its Market Perform rating on the company’s shares. According to InvestingPro data, 17 analysts have recently revised their earnings expectations downward, with analyst targets ranging from $390 to $503.
The adjustment followed FactSet’s recent earnings report, which revealed an adjusted earnings per share (EPS) that exceeded expectations, driven primarily by improved margins. With a healthy gross profit margin of 54.15% and a market capitalization of $16.46 billion, FactSet maintains a strong market position. This was despite a slowdown in Annual Subscription Value (ASV) growth. FactSet’s management expressed increased confidence, attributing this to a robust pipeline and a successful renewal cycle, particularly within the banking sector, which is anticipated to contribute to a better performance in the second half of fiscal year 2025. InvestingPro subscribers can access detailed financial health metrics, showing FactSet currently maintains a "GOOD" overall financial health score.
In light of the current broader economic conditions, the analysts at BMO have adopted a more cautious stance. They note that while FactSet’s guidance for fiscal year 2025 has been largely reaffirmed, it now incorporates the impact of some recent minor acquisitions. These acquisitions, referred to as "tuck-in acquisitions," are small enough to be integrated into the company’s existing operations without significant disruption.
The analyst from BMO provided commentary on the situation, stating, "Margin-Driven Beat; OK Guidance; FDS reported a margin-driven adjusted EPS beat, despite ASV growth deceleration. Management tone sounded more confident despite the broader macro weakness as the pipeline and successful renewal cycle (banking-driven) drives the F2H25 expected improvement. FY2025E guidance was largely reaffirmed adjusting for some recent tuck-in acquisitions. We reduce our estimates and target price, now more cautious given the macro."
FactSet Research Systems is a global provider of integrated financial information, analytical applications, and industry-leading services for the investment and corporate communities. The company has demonstrated consistent shareholder value, maintaining dividend payments for 27 consecutive years with a current yield of 0.96%. The company’s performance, particularly in the second half of fiscal year 2025, is expected to be a focal point for investors, as it navigates through the prevailing macroeconomic challenges. For comprehensive analysis and additional insights, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks.
In other recent news, FactSet Research Systems reported its second-quarter earnings for fiscal year 2025, delivering an adjusted earnings per share (EPS) of $4.28, which surpassed analysts’ expectations of $4.21. The company also reported revenues of $571 million, slightly exceeding the anticipated $570.13 million, marking a 4.5% year-over-year growth. Despite this positive earnings surprise, BMO Capital Markets adjusted its outlook on FactSet, reducing the price target to $466 from $498, while maintaining a Market Perform rating. Analysts at Raymond (NSE:RYMD) James reiterated their Underperform rating, expressing concerns over FactSet’s transition to a more cyclically affected business amid strong competition.
FactSet’s management remains optimistic about the second half of fiscal 2025, supported by a robust sales pipeline and successful renewal cycles, particularly within the banking sector. The company’s recent acquisitions, including Irwin and LiquidityBook, were noted, although concerns were raised about potential overpayment. FactSet reaffirmed its guidance for organic Annual Subscription Value (ASV) growth, narrowing the range to $100-130 million, and maintaining an adjusted operating margin of 36-37%. The company continues to focus on strategic initiatives and product innovations, including the launch of six GenAI SKUs, to drive future growth.
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