FactSet Research Systems Inc (FDS.N) shares fell their most in more than a decade after the company forecast fourth-quarter revenue below analysts' estimates as its financial industry clients cut costs and lay off workers.
The big U.S. banks are not generating enough sales needed to keep their workforces at current levels, hurting financial information providers such as FactSet, whose data is used by portfolio managers, research analysts and investment bankers.
Goldman Sachs Group Inc (GS.N) recently let go several dozen employees in its securities division. Morgan Stanley (MS.N) is likely to lay off some employees in its investment banking and trading divisions, according to sources.
"We are definitely still in a market that is very choppy for both our buy-side and sell-side clients globally," Chief Executive Phil Hadley said on the company's conference call.
The latest wave of job cuts in the financial sector - key customers for FactSet and its rivals Thomson Reuters Corp (TRI.N), Bloomberg LP and News Corp's (NWSA.O) Dow Jones - comes relatively soon after the 2008 crisis, when the industry laid off tens of thousands of employees.
Piper Jaffray analyst Peter Appert said FactSet's revenue and earnings growth is decelerating amid challenging operating conditions.
The Norwalk, Connecticut-based company forecast revenue of $204 million to $208 million. Analysts on average were expecting $210.2 million, according to Thomson Reuters I/B/E/S.
FactSet forecast adjusted earnings of $1.15 to $1.17 per share, above estimates of $1.08.
The outlook implies that revenue growth for the fourth quarter will slow down to 7.3 percent, compared with double-digit growth in the past three quarters.
Morningstar analyst Swami Shanmugasundaram said the company's annual subscription value (ASV) has been gradually slowing down. "For the first time in more than eight quarters, the ASV growth came in single digits," he said.
The company's ASV represents revenue potential for the next 12 months from all subscription services.
For the third quarter ended May 31, profit rose to $48 million, or $1.05 per share, from $43.3 million, or 92 cents per share, a year ago.
Revenue increased 10.2 percent to $202.3 million.
Analysts had expected earnings of $1.04 per share, on revenue of $203 million.
The revenue warning sent shares of the company down as much as 12.5 percent to a three-month low of $91.50, making the stock the biggest percentage loser on the New York Stock Exchange. It closed at $91.70.
The fall wiped off most of the gain in the stock since the company reported better-than-expected second-quarter results on March 13.
(Reporting by Neha Alawadhi in Bangalore; Editing by Maju Samuel, Saumyadeb Chakrabarty)