MSCI Inc. (NYSE: MSCI) announced impressive fiscal 2024 third-quarter results, exceeding analyst expectations with a 15.9% year-over-year revenue growth. This growth was driven by robust performance in index and analytics operations, coupled with a rise in asset-based fees. Despite a slight decline in operating margin, MSCI demonstrated its strong financial position with a healthy increase in free cash flow and a dividend declaration.
Morningstar (MORN) and MSCI (MSCI) are currently exhibiting overbought signals based on their Relative Strength Index (RSI), a popular momentum indicator used by traders. This suggests potential short-term price weakness, though analysts remain bullish on both companies.
MSCI, a leading provider of investment research and data, is facing headwinds from a challenging macroeconomic environment and increased competition. Despite these obstacles, the company continues to grow through its expanding portfolio, strategic acquisitions, and strong demand for its ESG and Climate solutions. This article analyzes MSCI’s recent performance, growth drivers, and valuation to determine if it’s a good time to invest.
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MSCI, an investment research firm, reported strong first-quarter earnings on Tuesday, posting a 14.8% increase in revenue to $679.97 million. However, the company slightly missed the consensus estimate of $684.14 million. Despite missing revenue estimates, MSCI exceeded expectations with an adjusted EPS of $3.52, above the consensus of $3.45. MSCI reported growth across its major operating segments, including Index, Analytics, and ESG and Climate, driven by higher subscription revenues and asset-based fees. Index operating revenues grew by 10.2% year-over-year to $373.9 million, led by recurring subscription revenues. Analytics operating revenues increased by 11.5% to $164 million, primarily due to higher subscription revenues from Equity and Multi-Asset Class Analytics products. ESG and Climate operating revenues grew by 16.1% to $77.9 million, driven by solid growth in Ratings, Screening, and Climate products. MSCI’s Chairman and CEO, Henry A. Fernandez, acknowledged elevated cancels due to a concentration of client events, including a major merger among banking clients. The company expects these cancels to subside. For fiscal year 2024, MSCI maintained its operating expense guidance of $1.30 billion to $1.34 billion, capex of $95 million to $105 million, and free cash flow of $1.225 billion to $1.285 billion. MSCI shares fell by 13.4% to close at $446.00 on Tuesday. Several analysts adjusted their price targets for MSCI after the earnings announcement. Deutsche Bank analyst Faiza Alwy upgraded the stock from Hold to Buy while lowering the price target from $613 to $569. Morgan Stanley analyst Toni Kaplan maintained an Overweight rating but reduced the price target from $671 to $615.
MSCI’s stock price experienced a significant drop of 13.2% in late morning trading on Tuesday following the release of its first-quarter 2024 financial results. The company’s profitability was impacted by higher expenses, which overshadowed higher-than-expected adjusted EPS. Operating revenue slightly missed analyst estimates, while total operating expenses surged by 22.7% year-over-year. Despite these challenges, MSCI reported growth in its total run rate and recurring subscription run rate. The company also reaffirmed its outlook for fiscal year 2024.
