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Shares of S&P Global Inc. SPGI have gained 25.5% over the past year, outperforming the 12.6% rise of the industry it belongs to.
Let’s delve into factors that have contributed to the company’s outperformance.
Upbeat 2021 Guidance
S&P Global raised its full-year 2021 guidance. The company now expects adjusted EPS in the range of $12.55-$12.75 compared with the prior guidance of $12.25-$12.45. The current Zacks Consensus Estimate of $12.72 lies within the updated guidance.
Free cash flow is anticipated between $3.4 billion and $3.5 billion compared with the prior guidance of $3.3-$3.4 billion.
Consecutive Earnings & Revenue Beat
S&P Global reported back-to-back earnings and revenue beat in all the four quarters of 2020 as well as in first-quarter 2021. While the bottom line gained from revenue growth and benefits of productivity initiatives, the top line performed well on the back of strength across all segments, namely S&P Global Ratings, S&P Global Market Intelligence, S&P Global Platts, and S&P Dow Jones Indices.
Strategic Acquisitions Bode Well
Acquisitions have been a key growth strategy for S&P Global, helping it continuously innovate, increase differentiated content and develop new products.
In 2020, the company completed the acquisitions of ESG Ratings Business (from RobecoSAM) and Greenwich Associates LLC. While ESG Ratings Business is expected to boost the company’s position as a premier resource for essential ESG data, ratings, benchmarks and insights, Greenwich can complement its existing portfolio of products and expand its offerings to new segments across financial services, including commercial banks, and asset and wealth managers.
In 2019, the company acquired 451 Research, Canadian Enerdata, Live Rice Index and Orion technology center. 451 Research strengthened S&P Global Market Intelligence's emerging technology expertise and offerings. Canadian Enerdata enhanced S&P Global Platts division's energy-analytical capabilities and strengthened its foothold in the North American natural gas market. Live Rice Index is a great addition to Platts’ global agriculture offering. Orion technology center provides the company’s employees access to the latest technologies and global communications infrastructure.
The company is expected to continue adding advanced technology and data sets through acquisitions, which in turn should boost its top- and bottom-line growth.
Zacks Rank and Stocks to Consider
S&P Global currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Zacks Business Services sector are Equifax EFX, Charles River CRAI and TransUnion TRU, each carrying a Zacks Rank #2 (Buy).
The long-term expected earnings per share (three to five years) growth rate for Equifax, Charles River and TransUnion is 14%, 15.5% and 20.9%, respectively.
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