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Why Shares of FactSet Outperformed in the First Half of 2020

By Lou Whiteman – Updated Jul 6, 2020 at 2:18PM

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The company's sticky products held up well during the COVID-19 crisis.

What happened

Shares of FactSet Research Systems (FDS 1.60%) gained 22.4% in the first half of 2020, according to data provided by S&P Global Market Intelligence, shrugging off the COVID-19 pandemic and delivering better-than-expected earnings. The financial data provider has a long history of steady growth and a sticky product, and it continued to perform for investors during a difficult spell for the markets.

So what

FactSet shares certainly felt the impact of the pandemic, with the stock trading off with the broader market in February and March. But the stock recovered faster than the S&P 500, in part perhaps because investors believed the increased market volatility would create more demand for FactSet products.

FDS Chart

FDS data by YCharts

The stock really separated from the S&P 500 in late June, after FactSet reported earnings that demonstrated just how resilient the business is. FactSet reported quarterly earnings that came in well ahead of expectations and said its client count grew by 55 to 5,743.

FactSet also raised its full-year 2020 guidance to earnings of $10.40 to $10.60 per share, ahead of the $10 per share consensus, despite lowering revenue guidance slightly.

A trader at his desk

Image source: Getty Images.

Now what

FactSet is a durable business that is benefiting from the pandemic due to the increased attention paid to financial markets, as well as lower expenses in areas including travel and entertainment. It is also doing a good job selling new and existing customers on its expanded wealth and analytics offerings.

FactSet over the past 10 years has outperformed the S&P 500 by more than 200 percentage points. The stock is not cheap, trading at 35 times earnings, but the company has shown over time that its products are tough to replace. This slow and steady winner can continue to outperform over the long run.

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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