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S&P Global (SPGI) Beats on Q3 Earnings, Ups '19 EPS View

Zacks Equity Research

S&P Global Inc. SPGI reported solid third-quarter 2019 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share of $2.46 beat the consensus mark by 13 cents and improved 16% year over year on the back of revenue growth and benefits of productivity initiatives. Revenues of $1.69 billion beat the consensus estimate by $33.2 million and improved 9% year over year.

So far this year, shares of S&P Global have gained 46.3%, outperforming the 37.5% rise of the industry it belongs to and 20.1% rise of the Zacks S&P 500 composite. 

 

Segmental Revenues

Ratings revenues of $789 million increased 13% year over year on the back of strong high-yield issuance in the United States and Europe and strong U.S. investment-grade issuance. Transaction revenues of $402 million increased 25%, driven by solid debt rating activity and increase in bank loan rating activity. Non-transaction revenues improved 2% to $387 million.

Market Intelligence revenues were up 5% year over year to $488 million, primarily driven by solid growth in Data Management Solutions, Credit Risk Solutions and Desktop.

Platts revenues rose 4% to $212 million owing to growth in both core subscription business and Global Trading Services.

S&P Dow Jones Indices revenues increased 14% to $232 million driven by 17% gain in asset-linked fees and 12% increase in exchange-traded derivative fees.

S&P Global Inc. Revenue (TTM)

S&P Global Inc. Revenue (TTM)

S&P Global Inc. revenue-ttm | S&P Global Inc. Quote

 

Operating Results

Adjusted operating profit increased 14% year over year to $877 million. Adjusted operating profit margin improved 230 basis points (bps) to 51.9%.

Segment wise, Ratings adjusted operating profit increased 19% to $472 million. Adjusted operating profit margin improved 340 bps to 59.9%.

For Market Intelligence, adjusted operating profit declined slightly to $167 million.  Adjusted operating profit margin decreased 160 bps to 34.3%.

Platts’ adjusted operating profit increased 5% to $107 million and adjusted operating profit margin increased 40 basis points to 50.7%.

S&P Dow Jones adjusted operating profit increased 19% to $163 million. Adjusted operating profit margin improved 280 bps to 70.1%.

S&P Global Inc. Price, Consensus and EPS Surprise

S&P Global Inc. Price, Consensus and EPS Surprise

S&P Global Inc. price-consensus-eps-surprise-chart | S&P Global Inc. Quote

 

Balance Sheet and Cash Flow

S&P Global exited third-quarter 2019 with cash, cash equivalents, and restricted cash of $2.02 billion compared with $1.92 billion at the end of the prior quarter. Long-term debt came in at $2.97 billion compared with $3.66 billion in the prior quarter.

The company generated $762 million of cash from operating activities in the reported quarter. Free cash flow was $690 million. Capital expenditures totaled $31 million.

Share Repurchases & Dividend Payout

During the third quarter of 2019, the company returned $640 million to shareholders. This includes $500 million through share repurchases (through an accelerated share repurchase (ASR) that was initiated in August) and $140 million in dividends.

2019 Guidance

S&P Global raised its full-year adjusted EPS guidance from the range of $9.10-$9.25 to the range of $9.30- $9.40. The current Zacks Consensus Estimate of $9.23 lies within the guided range.

Zacks Rank & Upcoming Releases

Currently, S&P Global carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Zacks Business Services sector are awaiting third-quarter 2019 earnings of key players like Clean Harbors CLH, Aptiv APTV and Republic Services RSG, each scheduled to release results on Oct 30.

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