On Friday, Deutsche Bank (ETR:DBKGn) updated its outlook on FactSet Research Systems (NYSE:FDS), increasing the price target to $483 from $474, while keeping a Hold rating on the stock. During FactSet's investor day held in New York, the company presented its latest product offerings and reaffirmed its fiscal year 2025 guidance.
FactSet emphasized its transition from a data provider to a technology provider, aiming for mid-single to high-single digit organic Annual Subscription Value (ASV) growth over the medium term. This growth is expected to outpace the previously stated FY25 guidance of 4-6%.
FactSet anticipates this acceleration to be driven by better client retention, the introduction of new solutions such as portfolio lifecycle management and GenAI products, and a focus on enterprise selling. This includes the adoption of usage-based pricing aimed at reducing clients' total cost of ownership and support.
The company also expects ASV growth from dealmakers, which represent 20% of ASV, to increase from 4% in fiscal year 2024 to a high single digit, reflecting a return to normal hiring levels at banks and a decrease in cancellations.
The company has forecasted a gradual increase in profit margins, projecting an annual expansion of 25 to 50 basis points, with a target margin of 37-38% by 2028.
This margin growth is anticipated to come from scale and productivity gains, which are expected to add approximately 150 basis points, while planned investments in internal systems, infrastructure upgrades, and new product development will offset these gains by 100 to 125 basis points.
FactSet's adjusted earnings per share (EPS) is expected to grow at a high-single to low-double digit rate, aligning with Deutsche Bank's model. While the fiscal year 2025 estimates remain unchanged, the bank has revised its fiscal years 2026 and 2027 estimates to reflect a 7% ASV growth, anticipating a stronger capital markets environment. The revised price target of $483 reflects a 25 times multiple on the expected EPS over the next 13 to 24 months.
In other recent news, FactSet Research Systems has seen a mix of analyst upgrades and downgrades following its fourth-quarter earnings results. The company reported adjusted earnings per share of $3.74 and a 4.9% year-over-year revenue increase to $562.2 million. Despite robust earnings, FactSet's fiscal 2025 earnings guidance of $16.80-$17.40 per share fell short of Wall Street's projections.
Redburn-Atlantic downgraded FactSet's stock from Neutral to Sell, citing concerns over the company's slowing growth and current strategy. In contrast, firms such as Evercore ISI, Stifel, and RBC Capital Markets have set higher price targets for FactSet, reflecting expectations of slightly better revenue growth in the near term.
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 ranges between 4-6%. Amid these recent developments, FactSet announced an upcoming investor day scheduled in New York City.
The company's fiscal year 2025 outlook is described as "a tale of two halves," with the second half expected to see a lift due to the execution of several large deals and contributions from new product launches.
Analysts from Goldman Sachs (NYSE:GS), BMO Capital, and Wolfe Research maintained a Sell, Market Perform, and Underperform rating on FactSet respectively, citing a modest forecast for fiscal year 2025 and competitive challenges.
InvestingPro Insights
FactSet Research Systems' strong market position and growth prospects are reflected in recent InvestingPro data. The company boasts a market capitalization of $18.83 billion and a P/E ratio of 35.15, indicating investors' high expectations for future earnings. This aligns with Deutsche Bank's positive outlook and increased price target.
InvestingPro Tips highlight FactSet's impressive dividend history, having raised its dividend for 26 consecutive years. This consistent dividend growth, coupled with a current dividend yield of 0.84%, underscores the company's financial stability and commitment to shareholder returns. Additionally, FactSet's strong performance is evident in its 21.59% price total return over the past three months, supporting Deutsche Bank's optimistic view on the stock's potential.
For investors seeking a deeper understanding of FactSet's financial health and growth prospects, InvestingPro offers 11 additional tips, providing valuable insights for informed investment decisions.
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