Will FactSet Research Systems Beat Earnings Estimates? - Analyst Blog

FactSet Research Systems Inc. FDS is set to report fiscal third-quarter 2014 results on Jun 17, 2014. Last quarter, it posted in-line earnings. Let us see how things are shaping up for this announcement.

Factors this Past Quarter

FactSet delivered modest second-quarter results. While the bottom line matched the Zacks Consensus Estimate, the top line lagged the same. Nonetheless, the year-over-year comparisons were favorable.

Moreover, the company has a high client retention ratio of 92%, which is a positive catalyst. Also, FactSet has been witnessing growth in its Annual Subscription Value (ASV), driven by new client wins. We believe that the improvements in the financial sector will positively impact the company, going forward. Additionally, the fresh buyback program will support its earnings per share.

FactSet continues to launch products and applications across its segments with special emphasis on financial services to gain more customers. Moreover, the company's acquisition of Revere Data and Matrix Data will help it to deliver innovative products to its clients and evolve as a global financial database company. It will also help FactSet to maximize value for its partners and provide customers with exclusive content sets.

Nonetheless, competition from Bloomberg L.P., Dow Jones & Company Inc., MSCI Inc. and Thomson Reuters, which are also coming up with substitute products at competitive prices, is a headwind for the company.

Earnings Whispers?

Our proven model does not conclusively show that FactSet Research Systems is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate currently stand at $1.26. Thus, the ESP is 0.00%.

Zacks Rank: FactSet Research Systems has a Zacks Rank #2 (Buy) which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies with a positive ESP and a favorable Zacks Rank that you may want to consider:

Micron Technology Inc. MU with Earnings ESP of +8.70% and a Zacks Rank #1 (Strong Buy)

SYNNEX Corp. SNX with Earnings ESP of +0.72% and a Zacks Rank #2

Lindsay Corporation LNN with Earnings ESP of +0.72% and a Zacks Rank #3 (Hold)

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