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FactSet Research Systems’ Revenue and Income Rose in Fiscal 1Q16

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FactSet Research Systems’ price movement

FactSet Research Systems (FDS) has a market cap of $6.7 billion. After the fiscal 1Q16 earnings report, FDS fell by 4.0% to close at $162.59 per share in yesterday’s trade. The stock’s price movements on weekly, monthly, and YTD bases are -5.7%, -2.4%, and 16.7%, respectively.

Technically, the stock has broken the support and is trading below all moving day averages. Currently, FDS is trading 4.4% below its 20-day moving average, 4.2% below its 50-day moving average, and 0.33% below its 200-day moving average.

The iShares North American Tech-Software ETF (IGV) invests 1.4% of its holdings in FactSet Research Systems. The ETF tracks a market cap–weighted index of US and Canadian software companies. The YTD price movement of IGV is 10.8%, as of December 14, 2015.

FactSet Research Systems’ (FDS) competitors and their market caps are listed below:

  • Thomson Reuters (TRI)—$29.7 billion
  • MSCI (MSCI)—$7.2 billion
  • Markit (MRKT)—$5.2 billion
  • Morningstar (MORN)—$3.6 billion
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FactSet Research Systems’ performance in fiscal 1Q16

FactSet Research Systems (FDS) reported fiscal 1Q16 revenue of $270.5 million, a rise of 11.5% when compared to revenue of $242.7 million in fiscal 1Q15. The company’s cost of services as a percentage of revenue rose by 5%, and its operating margin fell by 3.0% in fiscal 1Q16, as compared to fiscal 1Q15.

FactSet Research Systems’ net income and EPS (earnings per share) rose to $60.0 million and $1.43, respectively, in fiscal 1Q16, as compared to its net income and EPS of $55.9 million and $1.32, respectively, in fiscal 1Q15. The company’s adjusted operating income and adjusted diluted EPS rose 9.6% and 9.1% to $88.0 million and $1.44, respectively, in fiscal 1Q16, as compared to fiscal 1Q15.

Meanwhile, its cash and cash equivalents rose by 13.3%, and its investments fell by 1.7% in fiscal 1Q16 on a quarter-over-quarter basis. The company’s current ratio and debt-to-equity ratio rose to 2.5 and 0.82, respectively, in fiscal 1Q16, as compared to its current ratio and debt-to-equity ratio of 2.2 and 0.38, respectively, in fiscal 4Q15.

The company has acquired all the issued and outstanding membership interests of Portware. It funded the acquisition by borrowing $265 million under its existing revolving credit facility. Also, it repurchased 250,000 shares for $41.9 million.

On December 14, 2015, the company’s board of directors approved a $250 million expansion of the existing share repurchase program. With the expansion, $342.3 million is available for future share repurchases.

The company has declared a regular quarterly cash dividend of $0.44 per share on its common stock.

Projections

The company has made the following projections for fiscal 2Q16:

  • Revenue will be in the range of $280.0–$286.0 million.
  • The operating margin will be in the range of 31.0%–32.0%, which includes a 160 basis point reduction from the acquisition of Portware.
  • Diluted EPS will be in the range of $1.49–$1.53. If the US federal R&D (research and development) tax credit is not reenacted by February 29, 2016, each end of the diluted EPS range would decrease by $0.05 per share.
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