FactSet Stock Hits Record High After Analysts Boost Price Targets Post Solid Q1 Earnings

FactSet Research shares scaled to a new record high on Wednesday as several equity analysts raised their price targets after the financial data and software company beat earnings and revenue estimates for the fiscal first quarter.

The Norwalk, Connecticut-based company that provides financial analytics and services to the investment community worldwide reported quarterly adjusted earnings of $3.25​​ per share for the quarter ended in November, beating the market expectations of $3.00 per share.

The data company said its revenue jumped over 9% to $424.73 million from a year earlier, also topping the Wall Street consensus estimates of $419.13 million.

For the full year, the firm anticipates earnings between $12.30 to $12.50 per share range, with revenue in the range of $1.71 billion to $1.72 billion.

Following this, FactSet stock hit a record high of $478.89 on Wednesday. It soared over 43% so far this year.

FactSet Stock Price Forecast

Morgan Stanley raised the base target price of $352 from $323 with a high of $556 under a bull scenario and $196 under the worst-case scenario. The firm gave an “Underweight” rating on the financial analytics company’s stock.

“Strong organic growth led to a beat in the quarter, while new CFO, Linda Huber, provided insight into margin initiatives. We continue to prefer other names across the Info Services group with higher EPS growth that trade at lower multiples. We raise our price target to $352, but remain UW,” noted Toni Kaplan, equity analyst at Morgan Stanley.

“We believe FactSet’s (FDS) multiple is at risk given FDS trades at a significant premium to its history and peers. We prefer other stocks in our Analytics coverage that offer better value on a growth-adjusted basis. Market conditions continue to be challenging, pressuring growth. We assume a CAGR (’19-’25E) of 6.2% for revenues with adj. operating margins of ~34% in 2025.”

Several other analysts have also updated their stock outlook. CFRA raised the target price to $470. Jefferies lifted the target price to $482 from $388. Stifel upped the target price to $468 from $400. Credit Suisse increased the target price to $475 from $395.

Technical analysis also suggests it is good to buy now as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

However, ten analysts who offered stock ratings for FactSet in the last three months forecast the average price in 12 months of $439.67 with a high forecast of $550.00 and a low forecast of $351.00.

The average price target represents a -7.91% change from the last price of $477.43. Of those ten analysts, two rated “Buy”, five rated “Hold” while three rated “Sell”, according to Tipranks.

Analyst Comments

“What to do with FactSet (FDS) shares: Buy more if you think FY2022 organic ASV can trend above the high end of guidance range and that longer-term there could be balance sheet and portfolio-driven catalysts that are underappreciated (further M&A etc.). We prefer the sidelines for now and wait for a better entry point,” noted Hamzah Mazari, equity analyst at Jefferies.

Check out FX Empire’s earnings calendar

Earnings to Watch in Holiday-Shortened Week: Micron Technology, Nike, General Mills and CarMax in Focus

The following is a list of earnings slated for release December 20-24, along with a few previews. Although next week’s earnings are unlikely to have much of an effect on major market movements, it is sufficient to gauge investors’ sentiment.

Earnings Calendar For The Week Of December 20

Monday (December 20)

IN THE SPOTLIGHT: MICRON TECHNOLOGY, NIKE

MICRON TECHNOLOGY: The world’s leading semiconductor manufacturer is expected to report its fiscal first-quarter earnings of $2.01 per share, representing year-over-year growth of more than 155% from $0.78 per share seen in the same quarter a year ago.

The Boise Idaho-based semiconductor company is expected to post revenue growth of over 30% to around $7.7 billion from a year earlier. In the last two years, the company has topped expectations on earnings per share at all times.

“While the underlying demand trends are strong and producer inventory levels are low heading into a period of seasonal strength, there are some signs of inventory adjustments short term after customers-built inventory,” noted Joseph Moore, equity analyst at Morgan Stanley.

“We see demand growth on the back of seasonality, memory elasticity/higher content per unit, and low customer inventories, and very slow supply growth in DRAM given declines in capex. We continue to believe that memory stocks have a relatively well-defined earnings cycle, though highs and lows are likely to be better than they have been historically.”

NIKE: The world’s largest athletic footwear and apparel seller is expected to report earnings per share of $0.62 in the fiscal second quarter, which represents a year-over-year decline of over 20% from $0.78 per share seen in the same period a year ago.

The Beaverton, Oregon, footwear retailer would post revenue of $11.23 billion, down about 0.1% from a year earlier. For four quarters in a row, the company has exceeded expectations on earnings per share.

“We are raising our price target to $189 representing 40x our FY23E EPS of $4.73. We don’t believe management will make significant changes to its FY22 guidance but view the business as running above plan in N. America and Europe (EMEA). The gross margin could be a lever to raise back to prior guidance (+150bps at the high end). China is a point of uncertainty with investors and the model,” noted John Kernan, equity analyst at Cowen.

“We are raising our expectations for Q2, largely driven by an incrementally stronger outlook for N.A. and EMEA, with less conviction behind results in Greater China. We now model Q2 revenues +3% y/y ex FX to $11.52B vs consensus of $11.255B, driven by N.A. +2% (+3% vs 2019 compared to Q1’s +14% vs 2019), EMEA +1% (+17% vs 2019compared to Q1’s +19%), Greater China -2%, and APLA +10%.

We forecast gross margin expanding +130bps y/y, as higher full-price selling and DTC mix offsets higher freight costs and some product cost inflation (we include gross margin quarterly bps drivers in Fig 5). On a 2-year stack basis, product costs have deleveraged 240bps or more in each of the last two quarters. We see SG&A dollars growing +10% y/y to 31.1% of revenues (+204bps y/y). Ultimately, this drives EPS of $0.75 vs consensus of $0.63 – we model a 100bps impact from FX.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 20

TICKER COMPANY EPS FORECAST
MU Micron Technology, Inc.(MU) $2.01
NKE NIKE, Inc.(NKE) $0.63
BRZE Braze, Inc.(BRZE) $0.63

Tuesday (December 21)

IN THE SPOTLIGHT: GENERAL MILLS

The Minneapolis Minnesota-based company, General Mills, is expected to report its fiscal second-quarter earnings of $1.05 per share down from $1.06 per share seen in the same period a year ago.

The consumer foods manufacturer’s revenue would decline over 2% year-over-year to around $4.8 billion up from $4.72 billion seen a year earlier. In the last two years, the company has missed earnings per share estimates only once.

“While growth abounded for domestic food manufacturers as consumers rushed to stock up on essential wares as COVID-19 took hold, it hasn’t been a pure panacea for this intensely competitive space. And we think the future trajectory hinges on which of the trends that took centre stage the past few years will hold,” noted Erin Lash, Sector Director at Morningstar.

“In this context, while we concede many consumers honed their cooking skills while sheltering at home, as busy schedules resume, we think food consumption will revert such that a greater portion of budgets is expended outside of the home, in line with pre-pandemic levels. Further, although grocers simplified shelf assortments to maximize productivity during the peak in demand, we think the variety will return as supply chains normalize.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 21

TICKER COMPANY EPS FORECAST
FDS FactSet Research Systems Inc.(FDS) $2.99
GIS General Mills, Inc.(GIS) $1.05
NEOG Neogen Corporation(NEOG) $0.17

Wednesday (December 22)

IN THE SPOTLIGHT: CARMAX

The used-car retailer CarMax is expected to report its fiscal third-quarter earnings of $1.49 per share, which represents year-over-year growth of about 5% from $1.42 per share seen in the same period a year ago.

The Richmond, Virginia-based used car giant would post year-over-year revenue growth of nearly 50% to $7.63 billion in the quarter ended November 2021. In the last two years, the company has exceeded expectations on earnings per share with an average surprise of over 80%.

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect CarMax (KMX) to successfully execute their Omnichannel strategy, providing both online and physical dealer options to consumers,” noted Adam Jonas, equity analyst at Morgan Stanley.

KMX has consistently generated >$2,000 GPU and has one of the strongest balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing KMX to achieve operating leverage, with upside from the omni-channel rollout.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 22

TICKER COMPANY EPS FORECAST
CTAS Cintas Corporation(CTAS) $2.62
KMX CarMax, Inc.(KMX) $1.5
PAYX Paychex, Inc.(PAYX) $0.79

Thursday (December 23)

No major earnings are scheduled for release.

Friday (December 24)

The New York Stock Exchange and Nasdaq observe Christmas, markets will be closed on Friday.

FactSet Tops Q1 Earnings and Revenue Estimates; Reaffirms 2021 Outlook

FactSet, which provides financial analytics and services to the investment community worldwide, reported better-than-expected earnings in the first quarter, largely driven by higher sales of analytics and content & technology solutions.

The Norwalk-based software company said its earnings per share jumped over 11% over the past year to $2.88, beating market expectations of $2.75. FactSet revenue climbed about 6% to $388.2 million from the same period a year earlier, beating the Wall Street estimate of $387.3 million.

“Over the next five years, we expect FactSet to organically grow revenue in the mid-single-digit percent range. We expect growth in the firm’s analytics software offerings, data feeds, and wealth management to be faster than the firm’s average. We expect FactSet’s core desktop revenue to be flat or grow slightly as pressures on active asset manager budgets remain,” said Rajiv Bhatia, equity analyst at Morningstar.

“FactSet’s GAAP operating margin in fiscal 2019 was 30.5% and in 2020 fell to 29.4% due to non-recurring items. Looking ahead we expect operating margins in fiscal 2021 to be similar to the 30.5% seen in fiscal 2019 and improve to the 34%-35% range within five years. With FactSet’s strong cash position, we expect the company to look at acquisitions but valuations could prove challenging. Historically, FactSet’s operating margins have declined from acquisitions as the companies FactSet acquires are typically sub-scale,” Bhatia added.

FactSet forecasts organic ASV plus professional services to increase between $55 million and $85 million over fiscal 2020, GAAP revenue in the range of $1,570 million and $1,585 million and GAAP operating margin is expected to be in the range of 29.5% and 30.5%. The research company expects GAAP diluted EPS between $10.05 and $10.45 and adjusted diluted EPS in the range of $10.75 and $11.15.

FactSet shares closed 4.14% lower at $332.65 on Monday. However, the stock is up over 20% so far this year.

“What to do with FactSet shares: Hold on to what you own if you believe Annual Subscription Value (ASV) guidance is conservative and that the company can deliver on its multi-year investment initiative. Although execution at the company has been very good so far, we remain neutral due to valuation,” said Hamzah Mazari, equity analyst at Jefferies.

FactSet Stock Price Forecast

Nine analysts who offered stock ratings for FactSet Research in the last 3 months forecast the average price in 12 months at $313.57 with a high forecast of $350.00 and a low forecast of $269.00. The average price target represents a -5.74% decrease from the last price of $332.65. From those nine equity analysts, none rated “Buy”, five rated “Hold” and four rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $278 with a high of $413 under a bull scenario and $159 under the worst-case scenario. The firm currently has an “Underweight” rating on the financial data and software company’s stock.

“Annual Subscription Value (ASV) modestly decelerated in the quarter as some deals were pushed out. The guidance was maintained, which calls for a continued deceleration of ASV for F’21, as well as only 1% EPS growth at the midpoint. We raise our price target to $278 but remain UW as valuation is elevated on a growth-adjusted basis,” noted Toni Kaplan, equity analyst at Morgan Stanley.

Several other analysts have also recently commented on the stock. UBS raised the stock price forecast to $336 from $313. Deutsche Bank upped their price objective to $315 from $293 and gave the stock a “hold” rating in September. Wells Fargo & Company upped their price objective to $310 from $280 and gave the stock an “equal weight” rating. At last, Raymond James reaffirmed a “sell” rating on shares of FactSet Research Systems.

Analyst Comments

“We believe FactSet’s (FDS) multiple is at risk given our view that revenue growth does not accelerate and margin expansion stalls. We prefer other stocks in our Analytics coverage that offer better value on a growth-adjusted basis,” Morgan Stanley’s Kaplan.

“While we view FDS as being one of the least exposed to COVID-19 out of our Business Services coverage, market conditions could be challenged, leading to lower-than-normal growth. We assume a CAGR (’19-’24E) of 5% for revenues with adj. operating margins of 33% in 2024.”

Check out FX Empire’s earnings calendar