Bloomberg News

FactSet Falls After Subscriber Decline Overshadows Earnings

December 13, 2011

(Updates with closing shares in second paragraph and PE ratios in ninth paragraph.)

Dec. 13 (Bloomberg) -- FactSet Research Systems Inc., a provider of financial data to investment managers and banks, fell the most since August after a decline in subscribers overshadowed a higher-than-estimated profit forecast.

Customers fell by 1,200 to 46,900 during the fiscal first quarter, which ended in November, Norwalk, Connecticut-based FactSet said in a statement today. Avondale Partners LLC estimated subscribers would increase to 48,719. It was the first decline versus the prior quarter in nine periods, according to data compiled by Bloomberg. FactSet’s shares lost 6.9 percent to $88.24 at the close of trading in New York, the biggest drop since Aug. 8.

Firms that serve banks, brokers and money managers face less business as the financial industry reduces spending after the European debt crisis prompted MF Global Holdings Ltd.’s collapse in October. Thomson Reuters Corp., a financial news and data company, is replacing its chief executive officer. Bloomberg LP, the parent of Bloomberg News, competes with FactSet and Thomson Reuters.

“While we expected that the headcount reduction in the securities industry would have a dampening effect on user growth, we were surprised to see an actual sequential decline,” Peter Heckmann, a Prairie Village, Kansas-based analyst at Avondale, said in a telephone interview.

FactSet reported first-quarter profit excluding some items of $1.02 a share, beating the average analyst estimate of $1 in a Bloomberg survey. This quarter, earnings will amount to $1.10 to $1.12 a share, compared with the average analyst projection of $1.02, FactSet said. Revenue will be no more than $200 million in the three-month period ending in February, less than the average analyst forecast of $200.8 million.

Sell-Side Firms

All of the customer declines last quarter were from sell- side firms, or brokerages and securities firms, according to FactSet’s statement. Money managers, or buy-side firms, increased subscriptions, the company said.

Citigroup Inc., the third-biggest U.S. bank, told regulators that 413 employees may be dismissed in New York City as the firm starts 4,500 job cuts announced last week, according to a Dec. 9 filing with New York’s Department of Labor. Citigroup Chief Executive Officer Vikram Pandit, who announced the cuts during a Dec. 6 presentation, aims to trim costs amid slumping revenue and what he called “unprecedented” market conditions.

Financial firms have suffered from the euro zone’s debt crisis. Losses on government bonds drove MF Global into bankruptcy on Oct. 31. The KBW Bank Index of 24 companies fell 27 percent this year through yesterday, heading for the second- biggest annual decline since 1993. FactSet shares gained 1.1 percent during the same period, while Thomson Reuters retreated 28 percent to $26.67.

FactSet is trading at 24.24 times reported profit, 45 percent above the price-to-earnings ratio for the Standard & Poor’s Midcap 400 Index, according to Bloomberg data. New York- based Thomson Reuters is valued at 15.33 times earnings.

FactSet’s annual subscription value, a revenue forecast for the next 12 months based on current services sold to customers, was $782 million in the quarter that ended Nov. 30, a 13 percent increase from a year earlier.

“Volatility in the financial markets interrupted short- term buying patterns from our clients, dampening our ASV growth this quarter,” Philip Hadley, FactSet’s chairman and chief executive officer, said in today’s statement.

--With assistance from Nikolaj Gammeltoft in New York. Editors: Nick Baker, Chris Nagi

To contact the reporter on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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