It has been about a month since the last earnings report for FactSet Research (FDS). Shares have added about 3.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is FactSet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
FactSet’s Q2 Earnings Beat Estimates
FactSet Research Systems has reported impressive results for the second-quarter fiscal 2026, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.
FDS’ earnings per share of $4.46 beat the consensus mark by 2.1% and increased 4.2% from the year-ago quarter. Revenues of $611 million beat the Zacks Consensus Estimate by a slight margin and rose 7.1% from the year-ago quarter.
FactSet’s Revenues in Detail
Organic revenues increased 6.8% year over year to $606.2 million. Region-wise, organic revenue growth was 7.4% for the Americas, 4% for the EMEA and 9.7% for the Asia Pacific.
Revenues generated from the Americas segment were $399.7 million, up 8.1% from the year-ago quarter, surpassing our estimate of $396.2 million. Revenues from the EMEA were $149.1 million, an increase of 4% from the year-ago quarter. The figure beat our estimate of $145.2 million. Revenues from the Asia Pacific were $62.2 million, marking 8% growth on a year-over-year basis, surpassing our estimate of $61.8 million.
FDS’s ASV Plus Professional Services
FactSet’s Annual Subscription Value (ASV) plus professional services was $2.5 billion. Organic ASV was $2.4 billion, up 6.7% from the year-ago quarter.
Organic ASV generated from the United States was $1.6 billion, increasing 7% from the year-ago quarter. Organic ASV from the EMEA was $594.2 million, gaining 4.3% year over year. Organic ASV from the Asia Pacific was $249.1 million, up 10% on a year-over-year basis.
FactSet added 98 clients in the second quarter of fiscal 2026, driven by corporate and wealth management clients, taking the total to 9,101. The annual client retention rate is 91%.
FactSet's Operating Results
The adjusted operating income was $214.1 million, which moved up marginally from the year-ago quarter and missed our estimate of $216.3 million. The adjusted operating margin of 35% declined 230 basis points from the year-ago quarter.
FactSet’s Balance Sheet & Cash Flow
The company exited the quarter with a cash and cash-equivalent balance of $268.3 million compared with $275.4 million in the first quarter of fiscal 2026. The long-term debt was $1.4 billion, flat with the preceding quarter.
FDS generated $211.7 million in cash from operating activities. However, its capital expenditure was $26 million. The free cash flow utilized was $185.7 million.
FY26 Guidance for FDS
For fiscal 2026, the company hiked revenue expectations to $2.45-$2.47 billion compared with the preceding quarter’s view of $2.423-$2.448 billion.
FDS raised earnings per share expectations to $17.25-$17.75 compared with the preceding quarter’s $16.9-$17.6. The adjusted operating margin is projected to be 34-35.5%.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a upward trend in estimates revision.
VGM Scores
Currently, FactSet has a average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a score of B on the value side, putting it in the top 40% for value investors.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise FactSet has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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FactSet Research Systems Inc. (FDS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).