FactSet's Asset Sales Boost Investor Value, Q4 View Revised

FactSet Research Systems Inc. (NYSE:FDS) has always strived to maximize shareholder value. In its efforts to do so, the business information services provider has recently completed the sale of its two low-margin businesses and announced an accelerated share repurchase program.

Last week, FactSet announced the completion of the sale of Market Metrics and Matrix Solutions – the company’s market research businesses that focus on advisor-sold investments and insurance – to Asset International, a portfolio company of Genstar Capital. The companies had entered into a definitive agreement this May.

FactSet received $165 million from the sale of these assets. Apart from this, the company will also receive an earn-out of $10 million, depending on the achievement of certain growth targets over the next two years.

We remind investors that FactSet had acquired Market Metrics in mid Jun 2010 for a total consideration of $55 million. Market Metrics conducts surveys on brokers, research analysts and advisors every year. The databases and reports are used by senior management of companies for formulating business strategies.

In January, Bloomberg reported that FactSet is looking for a potential buyer for Market Metrics. It was then anticipated that Broadridge Financial Solutions Inc. (NYSE:BR) would be the one to make an offer.

Note that FactSet had earlier revealed its plans to use the proceeds generated from the transaction to buy back shares. On Jul 5, the company announced an accelerated share buyback program worth $120 million with Bank of America (NYSE:BAC) .

FactSet has been committed to maximize shareholders’ wealth. In fiscal 2015, the company spent $256.2 million on share repurchases and distributed $66.6 million as dividends. Continuing this strategy, FactSet returned approximately $113.3 million through share repurchases and paid $36.1 million as dividends during the first two quarters of fiscal 2016. Such shareholder-friendly initiatives not only boost investor confidence in the stock but also drive bottom-line growth.

On the same day, the company provided a revised outlook for the fourth quarter of fiscal 2016 as well. FactSet has marginally lowered its revenue guidance range for the quarter to $286–$292 million from its earlier projection of $292–$298 million. However, its guidance for adjusted operating margin and earnings per share were unchanged.

Notably, FactSet’s persistent focus on product innovation across segments, with an emphasis on financial services to expand the customer base, has helped keep the company afloat even amid the current macroeconomic challenges. Further, although the company lowered its revenue guidance marginally, we believe that aggressive share repurchase programs will support its bottom line in the long run and boost shareholder value.

Nonetheless, competition from the likes of Bloomberg, Dow Jones & Company Inc., MSCI Inc. and Thomson Reuters (TO:TRI) , all of which are struggling equally hard to introduce substitute products at competitive prices, is a material headwind for the company.

Currently, FactSet carries Zacks Rank #3 (Hold).