UBS Downgrades FactSet To Sell

UBS’ Alex Kramm downgraded the rating for FactSet Research Systems Inc. FDS from Neutral to Sell, while reducing the price target from $164 to $138. He mentioned that the market headwinds were “too strong to ignore.”

While the company had a strong franchise, it was not immune to industry pressures, analyst Alex Kramm commented. He wrote, “After several months marked by downward movement and volatility in equity markets, we believe FDS's client-base will have to reassess its ability to spend.”

Slowdown In ASV Growth Rates

Following the financial crisis, ASV growth rates had decelerated. Although more recently FactSet had generated consecutive quarters of accelerating growth and had experienced multiple expansion, with improving macro conditions, year-to-date downward pressure would likely impact budgets in the near term, Kramm mentioned.

“In fact, we have already heard that parts of FDS's customer base are taking a hard look at budgets, and as was already reflected in January metrics released last Friday, buy-side employment could be under pressure for quarters to come,” the analyst said.

The EPS estimate for 2016 has been reduced from $7.02 to $6.89 to reflect revised ASV growth forecasts. Decelerating buy-side employment growth and a potential slowdown in ASV growth in the upcoming F2Q EPS report could result in FactSet’s shares moving to the low end of its historical range, Kramm added.