Will FactSet Earnings Keep the Stock Soaring?

FactSet Research (FDS -0.97%) will release its quarterly report on Tuesday, and investors have been heartily enthusiastic about the stock's potential for growth. With its shares trading at all-time highs, though, FactSet earnings will need to deliver strong results to justify the favorable impression shareholders currently have.

FactSet provides market information and research primarily to institutional investors, who use its tools to try to stay ahead of their competition. As the amount of available data has increased exponentially, the most valuable element of FactSet's service is helping its users weed out unimportant noise from the key information that can provide its clients an edge. Let's take an early look at what's been happening with FactSet Research over the past quarter and what we're likely to see in its report.

Stats on FactSet Research

Source: Yahoo! Finance.

Can FactSet earnings keep growing this quarter?
Analysts have had generally favorable views on FactSet earnings in recent months, boosting their August-quarter estimates by $0.03 per share. The stock has continued to climb higher as well, rising 12% since mid-June.

FactSet came into the current quarter on a somewhat negative note, as the company didn't manage to grow as quickly in its May quarter as investors had hoped. Net income rose 11% on a 6% jump in sales, but FactSet noted that the business environment among its client base was relatively weak, especially among those subscribers that provide stock research and strategic-alternatives consulting services.

Some of FactSet's competitors have struggled in light of the reluctance to invest among individual investors. Morningstar (MORN -4.93%) has noted difficulty in selling its subscription services, which are largely focused at individual investors, because of overall risk aversion and the low-interest rate environment. Both FactSet and Thomson Reuters (TRI -0.04%) have somewhat different exposure to the market than Morningstar, as Thomson Reuters offers highly specialized products at premium prices to both financial customers and clients in the legal, tax, and accounting business. But all three rely to some extent on healthy financial markets to drive success.

But those conditions haven't stopped FactSet from taking steps to boost its business. Earlier this month, FactSet bought Revere Data, adding its proprietary classification system and database on intercorporate relationships to FactSet's broader offerings. The move is designed to help clients draw conclusions from FactSet's data with greater insight.

In the FactSet earnings report, watch to see whether subscriptions start to show faster growth prospects. Without a steady of flow of new customers, it'll be hard for FactSet to sustain the growth that supports its currently hefty stock valuation.

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