FactSet Research Systems' Revised Guidance Reflects Delayed Growth, Yet Analyst Anticipates Share Gains and Margin Expansion

BMO Capital Markets analyst Jeffrey M. Silber reiterated the Market Perform rating on FactSet Research Systems Inc. FDS, raising the price target to $447 from $436.

FDS reported Q1 FY24 sales growth of 7.4% Y/Y to $542.2 million, marginally beating the consensus of $540.36 million. 

F1Q24 top-line trends were in line, though revised guidance implies slowing growth, most prominently in F2Q24, according to the analyst.

FY2024 guidance was revised lower by 1% (ASV and revenue) due to pricing, erosion, and delayed client decision-making; management had previously been contemplating a 2H24 recovery, though the expected recovery has been pushed back a bit, the analyst notes.

FY2024 guidance for 6% ASV growth implies slower growth than in F1Q24.

Management cited: -40bps pricing pressure/realization; -30bps higher erosion (trimming subscriptions); and -25bps from delayed decision-making from clients (mostly in banking).

Per the analyst, FDS should continue to gain share in the market data industry as has been the case historically. 

The company has some buffers against economic cyclicality, as virtually all of its business is subscription-based, and has been expanding into the relatively more stable wealth industry, Silber adds.

The analyst projects future margin expansion, given management's increased focus there.

The analyst lowered the FY24 revenue estimate to $2.203 billion from $2.214 billion.

Price Action: FDS shares are trading higher by 0.79% to $452.18 on the last check Wednesday.