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Why Shares of FactSet Soared Today

By Lou Whiteman – Jun 25, 2020 at 4:18PM

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Earnings came in better than expected.

What happened

Shares of FactSet Research Systems (FDS 0.97%) climbed 15% on Thursday after the financial data provider reported quarterly results that came in ahead of expectations. Revenue came in a bit light of expectations, but FactSet made up for it by improving margins.

So what

Before markets opened on Thursday, FactSet reported fiscal third-quarter earnings of $2.86 per share on revenue of $374.1 million. Analysts were expecting $2.43 per share in earnings on revenue of $376 million. The company's client count grew by 55 to 5,743, and its user count increased by 2,199 to 131,095.

An investor sitting at a multi-screen terminal.

Image source: Getty Images.

Adjusted operating margin for the quarter improved to 35.5% from 34%, in part thanks to decreased facilities spending due to the pandemic. FactSet reported capital expenditures in the quarter of $11 million, down from $11.4 million a year ago.

"We had a strong third quarter and executed well in challenging circumstances," CEO Phil Snow said. "The steps we have taken position us well to finish our fiscal year on target as we continue to evaluate and solve for evolving industry needs."

Now what

FactSet shares came into earnings trading at near all-time highs, and the quarterly results did little to slow the market's enthusiasm for the company. FactSet also raised its full fiscal year earnings guidance to a range of $10.40 to $10.60 per share, up from $9.85 to $10.15 per share, while lowering its revenue guidance to a range of $1.485 billion to $1.49 billion, from $1.49 billion to $1.5 billion.

This is a solid company that has delivered for investors over the long haul, and I certainly wouldn't be in a hurry to sell and take gains if I was a shareholder. But FactSet in the quarter likely benefited from a volatile stock market and an influx of new individual traders. Given its lofty share price, it will likely be difficult for FactSet to keep this level of momentum in the months to come.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends FactSet Research Systems. The Motley Fool has a disclosure policy.

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