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Shares of S&P Global Inc. SPGI have gained 6.9% over the past year, outperforming 5.4% decline of the industry it belongs to.
Let’s delve into the factors that have contributed to the company’s outperformance.
Consecutive Earnings & Revenue Beat
S&P Global reported back-to-back earnings and revenue beat in the last six quarters. 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 will boost the company’s position as a premier resource for essential ESG data, ratings, benchmarks and insights, Greenwich will 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 with 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.
Rising Demand for Business Information Services
S&P Global is gaining from increasing demand for business information services. Constantly increasing volume of data from private and government organizations has augmented demand for improved enterprise-wide financial performance visibility. Higher demand for news, information and analytics solutions will drive the market’s growth. Further, the industry is benefiting from rising demand for risk mitigation. Changes in market dynamics are more or less a constant phenomenon and expose companies to credit fund as well as operational risks. Accurate market and financial information is required for risk mitigation, thereby spurring demand for business information services.
Zacks Rank and Stocks to Consider
S&P Global currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Servicessector are ManpowerGroup MAN, Huron Consulting HURN and NV5 Global NVEE, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected earnings per share (three to five years) growth rate for ManpowerGroup, Huron Consulting and NV5 Global is 3.5%, 14% and 16.8%, respectively.
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