FactSet Research Systems Inc. Posts Higher Q3 Results; Meets EPS Views (FDS)

Before the opening bell on Tuesday morning, Factset Research Systems (FDS) reported its third quarter results, posting gains in earnings and revenue over last year’s Q3.

FDS’s Earnings in Brief

Factset reported third quarter revenues of $231.76 million, which are up 8% from last year’s Q3 revenues of $214.61 million. The company’s adjusted net income was up 6% to $53.1 million from $50.1 million reported last year. Adjusted EPS for the quarter came in at $1.25, marking an 11% improvement over last year’s Q3 EPS of $1.13. Factset’s EPS met analysts’ estimates, while revenues were slightly above expectations of $230.57 million. Looking ahead to next quarter, FDS sees EPS in the range of $1.30-$1.32 on revenue in the range of $235 million to $240 million. Analysts are looking for EPS of $1.29 on revenues of $235.6 million.

CEO Commentary

FDS chairman and CEO Philip Hadley had the following comments: “I’m pleased to see that our ASV growth rate accelerated to 7% and adjusted EPS grew by 11% in the just completed third quarter. We continued to capitalize on our opportunities as evidenced by adding 30 net new clients and 620 net new users in the past three months. I’m also excited to announce that Phil Snow has accepted the role as President, effective July 1st.”

FDS’s Dividend

Factset Research Systems recently raised its dividend by 11% to 39 cents from 35 cents per quarter. The company’s next dividend is payable today to all shareholders of record on May 30.

Stock Performance

FDS stock was inactive in pre-market trading. YTD, the stock is up 4.18%.

FDS Dividend Snapshot

As of Market Close on June 16, 2014

Click here to see the complete history of FDS dividends.

Cliffs Natural Resources: Why Deutsche Bank Cut Its Rating

After yesterday’s announcement that Cliffs Natural Resources (CLF) would look to exit its Bloom Lake project, Deutsche Bank’s Jorge Beristain and team slashed their rating on the struggling iron miner to Hold from Buy. They explain why:

Agence France-Presse/Getty Images

Stripping out [Eastern Canada iron ore] operations from 1Q15 onwards, lowers Deustche Bank’s estimated EBITDA by an average of 5% over the next 3 years to ~$650m/yr, while reduced depreciation & amortization increases EPS. Incorporating estimated related closure costs of $700m (assuming $150m/yr in first three years and $125m/yr in following two) and
$71m legal loss in 1Q15, [net-present value, or] NPV declines $4/sh to $12/sh. However, we note some potential NPV offsets (not yet considered) include reduced maintenance capex and SG&A costs reduce could provide ~$1/sh tailwind. Should Cliffs be in a position to forego remaining $750m tailings dam capex, NPV could increase a further ~$3/sh…

Cliffs' price target of $10 [down from $17. Ed.] is now based on 0.85x (from prior ~1.0x) our revised NPV of ~$12 ($16), calculated under a  discounted cash-flow methodology. Increased net-debt-to-EBITDA is becoming a source concern and reason for applying 15% discount to NPV. Risks include higher-/lower-than-expected iron ore and coal prices, possibility of breaching covenants (on reduced cash flow generation) and increase/decrease of foreign exchange rates, particularly for the Australian Dollar.

Investors don’t appear too worried today, however. Cliffs shares have gained 6.3% to $8.69 at 1:35 p.m. today, even as BHP Billiton (BHP) has fallen 1.5% to $55 and Rio Tinto (RIO) has dropped 2.4% to $45.07.