On Friday, Goldman Sachs (NYSE:GS) reiterated its Sell rating on FactSet Research Systems (NYSE:FDS), maintaining a $419.00 price target. The firm expects a negative investor reaction to FactSet's third fiscal quarter 2024 earnings release due to a reduced full-year revenue and organic Annual Subscription Value (ASV) plus professional services guidance.
Despite this, the financial data and software company's in-line revenue, and operating margins and earnings per share (EPS) exceeded consensus expectations.
FactSet's organic ASV plus professional services growth was reported at 5.0% year-over-year in the third quarter, slightly below the consensus estimate of 5.1% and a deceleration from the 5.4% growth seen in the second quarter.
Management now anticipates full-year organic ASV plus professional services growth to be between $85 million and $120 million, compared to the previously estimated lower range of $110 million to $150 million. Revenue expectations have also been adjusted to a range of $2.18 billion to $2.19 billion, down from the earlier forecast of $2.20 billion to $2.21 billion.
The lower ASV and revenue projections were somewhat offset by an increase in operating margin, attributed in part to a reduction in bonus accruals.
During the earnings call, the firm anticipates that investors will be keen to learn about several aspects: trends in buy-side headcount and budgets, changes in the selling environment and sales cycle over the past quarter, the reasons behind the reduced outlook for ASV plus professional services growth and revenue for fiscal year 2024, the extent of price realization achieved internationally, and details regarding cost savings for the quarter and the entire year.
Goldman Sachs' outlook follows FactSet's latest financial disclosure, which has led to a detailed review of the company's performance and future expectations. The firm's analysis sets the stage for investors to evaluate FactSet's current standing and strategic moves in the context of a challenging financial landscape.
In other recent news, FactSet Research Systems has been the subject of various analysts' reports. BofA Securities downgraded FactSet's stock from Neutral to Underperform, citing concerns about the company's revenue growth. The firm also reduced its price target to $407 from the previous $500 due to expected stagnation in FactSet's Annual Subscription Value (ASV) and revenues.
While BofA Securities anticipates a slowdown, RBC Capital maintained its Sector Perform rating and $464.00 price target for FactSet. The firm predicts FactSet will report third-quarter 2024 results that meet expectations, with a particular focus on fourth-quarter 2024 ASV growth. Still, RBC Capital also pointed out potential disruptions from the CSUBS merger and investments in cloud technology and the GenAI initiative.
Meanwhile, Wolfe Research initiated coverage on FactSet with an underperform rating and a price target of $430.00. The firm expressed concerns about the company's future earnings growth potential due to the competitive nature of the industry and the increasing demands of artificial intelligence (AI).
Conversely, BMO Capital Markets increased FactSet's share price target to $458 from $447, maintaining a Market Perform rating. This adjustment followed FactSet's reported earnings per share (EPS) that surpassed expectations, attributed to stringent cost management and specific personnel measures. Despite a slight deceleration in sell-side ASV growth, FactSet reaffirmed its fiscal year 2024 adjusted EPS guidance.
InvestingPro Insights
Amid the concerns outlined by Goldman Sachs, FactSet Research Systems (NYSE:FDS) exhibits a blend of strengths and cautionary signals. A notable InvestingPro Tip highlights the company's track record of increasing its dividend for 26 consecutive years, suggesting a commitment to shareholder returns even in challenging times. Moreover, FactSet's liquidity position is robust, with liquid assets surpassing short-term obligations, a reassuring sign for investors considering the company's financial stability.
InvestingPro Data indicates a market capitalization of $16.08 billion, with a P/E ratio of 32.89, reflecting a premium valuation in the market. While the company's revenue growth over the last twelve months as of Q2 2024 stands at 7.26%, this is paired with a high Price / Book multiple of 9.0, which may raise questions about the sustainability of its current stock price levels. Investors should also note that FactSet's profitability is affirmed, with the company being profitable over the last twelve months.
For those seeking further insight, InvestingPro offers additional tips on FactSet's performance and outlook, which can be accessed through the InvestingPro platform. Readers looking to delve deeper into the financial analytics of FactSet can use the coupon code PRONEWS24 to receive an extra 10% off a yearly or biyearly Pro and Pro+ subscription. With more tips available on InvestingPro, investors can gain a comprehensive understanding of the company's position and potential.
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