On Wednesday, Goldman Sachs (NYSE:GS) maintained its Neutral rating on shares of MSCI Inc . (NYSE:MSCI), with a steady price target of $617.00. MSCI's recent financial results showed a combination of strengths and challenges, according to the investment firm's analyst.
The company exceeded consensus expectations in terms of revenue, EBITDA margins, and earnings per share. However, this was offset by a downturn in net new recurring subscription sales and ongoing uncertainty regarding buy-side trends.
MSCI demonstrated robust performance in its Index asset-based fees, supported by strong fund inflows into ETFs linked to MSCI indexes and overall market appreciation. The company also reported solid growth in new sales in its Index and Analytics divisions.
However, the third quarter saw a reversal from positive growth to a decline in net new recurring subscription sales, attributed to a rise in cancellations. The analyst noted that cancellations are expected to remain high in the fourth quarter.
Growth in the ESG & Climate segment has been more moderate compared to previous periods, as asset managers have slowed down on purchasing these solutions. Despite the current headwinds, there are indications of market stabilization. Active manager AUM outflows have leveled off, and there are signs of improving client dialogues, which may signal a rebound in client budgets by 2025.
Goldman Sachs believes that the near-term challenges with net new subscription sales are counterbalanced by the potential for growth improvement in 2025, justifying the decision to maintain a Neutral stance on MSCI's stock.
In other recent news, MSCI Inc. reported strong third-quarter results, with a significant surge in index revenue. The financial data and analytics provider posted adjusted earnings per share of $3.86, surpassing analyst estimates of $3.76. Revenue rose 15.9% year-over-year to $724.7 million, exceeding expectations of $714.6 million. MSCI's index segment, a major contributor to total revenue, experienced an operating revenue increase of 11.8% to $404.9 million.
Asset-based fees also noted a jump by 19.5% to $168.6 million, reflecting a rise in assets under management in ETFs and other investment products linked to MSCI indexes. Furthermore, MSCI's analytics segment showed impressive performance with revenue rising 11.7% to $172.4 million. ESG and climate revenue grew 14.5% to $83.6 million.
InvestingPro Insights
MSCI's financial performance, as highlighted in the Goldman Sachs analysis, is further supported by real-time data from InvestingPro. The company's revenue growth of 15.03% over the last twelve months and a robust gross profit margin of 82.08% underscore its strong market position. These figures align with the analyst's observations on MSCI's solid performance in Index asset-based fees and growth in new sales across divisions.
InvestingPro Tips reveal that MSCI has raised its dividend for 11 consecutive years, with a current dividend yield of 1.11%. This consistent dividend growth, coupled with a 15.94% dividend increase in the last twelve months, reflects the company's financial stability and commitment to shareholder returns. Additionally, MSCI's strong return over the last five years, as noted in another InvestingPro Tip, corroborates the long-term value proposition for investors.
While the article mentions near-term challenges in subscription sales, MSCI's operating income margin of 53.72% suggests efficient operations and profitability. This efficiency, combined with the InvestingPro Tip that analysts predict the company will be profitable this year, may provide some reassurance to investors amid the current market uncertainties.
For readers interested in a more comprehensive analysis, InvestingPro offers 10 additional tips for MSCI, providing a deeper insight into the company's financial health and market position.
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