On Friday, Goldman Sachs maintained a Sell rating on FactSet Research Systems (NYSE:FDS) stock with a steady price target of $444.00. The firm's stance remains cautious in light of FactSet's fourth fiscal quarter results, which surpassed consensus on revenue and earnings per share but were shadowed by a modest forecast for fiscal year 2025.
FactSet, a provider of financial data and software solutions, is navigating a difficult sales landscape, with asset managers experiencing budget constraints. This challenge is somewhat offset by emerging opportunities in the wealth and banking sectors.
Despite these difficulties, 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 is modest, ranging between 4-6%, indicating little to no acceleration from the growth seen in fiscal year 2024.
The company's conservative outlook for fiscal year 2025 may be influenced by several factors, including intense market competition and limited ability to increase prices. This is highlighted by FactSet's loss of a significant European Union contract to a competitor during the quarter.
Moreover, FactSet anticipates that the recovery in ASV will be more pronounced in the latter half of fiscal year 2025, which casts uncertainty on near-term revenue projections.
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, considering the company's projection of only mid-single-digit organic ASV and revenue growth for fiscal year 2025.
In other recent news, FactSet Research Systems has been the focus of several analyst reports following its robust fourth-quarter results that surpassed expectations.
FactSet's adjusted earnings per share came in at $3.74, beating the consensus forecast of $3.62, while revenue rose by 4.9% year over year to $562.2 million, exceeding expectations of $546.76 million.
The company's organic revenue saw approximately a 5% increase year-over-year, although there was a slight deceleration in the growth of organic Annual Subscription Value.
Despite these positive results, BMO Capital maintained its Market Perform rating on FactSet shares, with a steady price target of $440.00. On the other hand, Wolfe Research has kept its underperform rating on FactSet shares, citing the company's commentary about the trajectory of revenue growth and factors contributing to the year-over-year margin squeeze.
FactSet also provided its first fiscal year 2025 outlook, which aligns with consensus estimates at the higher end. However, its earnings guidance of $16.80-$17.40 per share fell short of Wall Street's projection of $17.36. The company's full-year revenue estimate of $2.29-$2.31 billion aligns with the consensus estimate of $2.30 billion.
In addition to these developments, FactSet announced an upcoming investor day scheduled in New York City. FactSet, however, indicated that it does not plan to update its forward-looking statements before the release of its first-quarter earnings for fiscal year 2025.
InvestingPro Insights
As FactSet Research Systems (NYSE:FDS) faces a Sell rating from Goldman Sachs, it's helpful to look at some key metrics provided by InvestingPro that shed light on the company's current valuation and performance. With a market capitalization of $17.86B and a P/E ratio of 33.7, FactSet is trading at a high earnings multiple, which is reflected in a P/E ratio that stands above the industry average. This valuation is supported by a consistent track record of profitability, as evidenced by the company's profitability over the last twelve months and a high return over the last decade.
InvestingPro Tips highlight that FactSet has not only maintained but also raised its dividend payments for 26 consecutive years, showcasing a strong commitment to returning value to shareholders. Additionally, analysts predict the company will continue to be profitable this year. The company's revenue growth of 6.23% over the last twelve months, as of Q3 2024, although modest, indicates a steady upward trend. Meanwhile, the dividend yield stands at 0.93%, with a dividend growth of 6.12% over the same period, presenting an attractive aspect for income-focused investors.
For readers interested in a deeper dive into FactSet's performance and future prospects, InvestingPro offers even more tips and metrics. There are currently 7 additional InvestingPro Tips available, which can provide further insights into investment decisions related to FactSet.
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