Tuesday, Goldman Sachs (NYSE:GS) reiterated a Neutral rating on shares of MSCI Inc . (NYSE:MSCI) with a steady price target of $526.00. The financial firm anticipates a favorable investor response to MSCI's second-quarter earnings for 2024, which surpassed consensus expectations in revenue, EBITDA margins, and earnings per share (EPS). Moreover, MSCI confirmed its full-year guidance for free cash flow (FCF).
In the second quarter, MSCI saw a significant uptick in asset-based fees, registering an 18% year-over-year growth, a notable increase from the 13% growth observed in the first quarter. This was attributed to a rise in average assets under management (AUM). The company also experienced an acceleration in overall recurring subscription organic revenue growth, which reached 14%, up from 9% in the previous quarter.
Despite the broader growth, index recurring subscription organic revenue experienced a relatively modest year-over-year increase of 8%. Analytics organic revenue maintained a robust growth rate at 11%, while ESG & Climate organic revenue growth slowed to 10%. The Private Assets segment, affected by challenging commercial real estate conditions, recorded a mere 1% growth in organic revenue.
MSCI's net new recurring subscription sales saw a remarkable recovery, growing 16% year-over-year in the second quarter, a significant improvement from a 43% decrease in the first quarter. The company's EBITDA margins remained stable year-over-year at 60.7%.
Investors are expected to concentrate on several key aspects during the earnings call. Topics of interest include trends in buy-side budgets for the quarter, the rebound in net new recurring subscription sales, current ESG run-rate and new business trends, the persistence of Analytics organic revenue growth, and MSCI's strategy for balancing reinvestment with immediate margin performance.
In other recent news, MSCI Inc. has seen significant developments. The company announced its recent earnings report, which was closely followed by Deutsche Bank (ETR:DBKGn), maintaining a Buy rating on MSCI with a price target of $569. The report was expected to cover key areas such as sales environment and investment strategies, with particular interest in MSCI's integration of Burgiss, a private asset investment data provider.
The company also made internal leadership changes, with Alvise Munari, previously the Chief Client Officer, taking the new role of Chief Product Officer and Axel Kilian succeeding Munari as Chief Client Officer. Additionally, MSCI appointed C. Jack Read as the Global Controller and Chief Accounting Officer.
Analyst firms have offered varied perspectives on MSCI. RBC Capital reiterated an Outperform rating, emphasizing the company's strong position and potential for growth, while Goldman Sachs maintained its Neutral stance. Redburn-Atlantic and BofA Securities upgraded MSCI stock from Sell to Neutral.
Despite a slowdown in new recurring subscription sales and an uptick in client cancellations, analysts from Redburn-Atlantic revised their earnings per share forecasts upward, reflecting the expectation that management initiatives could positively impact the company's financial performance. These are among the recent developments for MSCI Inc.
InvestingPro Insights
Goldman Sachs' neutral stance on MSCI Inc. comes at a time when the company is showing strong financial metrics and positive analyst sentiment. According to InvestingPro data, MSCI has a market capitalization of $43.93 billion, with a high operating income margin of 53.99% for the last twelve months as of Q1 2024. This robust margin performance complements the company's reported EBITDA growth of 14.34% in the same period, underlining its efficiency and profitability.
From an investment perspective, MSCI has demonstrated a commitment to shareholders, as evidenced by a consistent dividend growth, with an increase of 15.94% over the last twelve months as of Q1 2024. Moreover, InvestingPro Tips highlight that MSCI has not only raised its dividend for 10 consecutive years but also has 4 analysts revising their earnings upwards for the upcoming period, suggesting confidence in the company's future performance.
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