We expect FactSet Research Systems Inc.FDS to beat expectations when it reports fiscal first quarter 2016 results on Dec 15.
Why a Likely Positive Surprise?
Our proven model shows that FactSet is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction or Earnings ESP , which represents the difference between the Most Accurate estimate ($1.47 per share) and the Zacks Consensus Estimate ($1.46 per share), stands at +0.69%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #3 (Hold): Note that stocks with Zacks Rank of #1, 2 and 3 have a significantly higher chance of beating estimates. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of FactSet's Zacks Rank #3 and +0.69% ESP makes us very confident in looking for a positive earnings surprise.
What is Driving the Better-Than-Expected Earnings?
FactSet continues with product innovation across its segments with special emphasis on financial services to gain more customers. Moreover, the company's acquisition of Revere Data, Matrix Data and Code Red will help it to deliver innovative products and evolve as a global financial database company. It will also help FactSet to maximize value for its partners and provide exclusive content sets.
FactSet is witnessing growth in its Annual Subscription Value (ASV), driven by new client additions. We believe that its growing customer base coupled with high client retention rate (95% of ASV) and a competitive pricing strategy will positively impact results in near term.
Going forward, the share repurchase program is expected to support its earnings per share and boost shareholder value.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat in their upcoming release:
ConAgra Foods, Inc. CAG with Earnings ESP of +3.39% and a Zacks Rank #2 (Buy)
Carnival Corporation CCL with Earnings ESP of +17.07% and a Zacks Rank #3
Darden Restaurants, Inc. DRI with Earnings ESP of +4.76% and a Zacks Rank #3