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S&P Global (SPGI) to Post Q2 Earnings: A Beat in the Cards?

S&P Global, Inc. SPGI is slated to report second-quarter 2017 results on Jul 27, before the market opens. In the previous quarter, the company delivered a positive earnings surprise of 15.7%. Notably, the company surpassed the Zacks Consensus Estimate in the last four quarters with an average beat of 9.2%. Nonetheless, it remains to be seen if the company will be able to keep its earnings streak alive.

Let’s see how things are shaping up for this announcement.

Likely Earnings Beat in the Cards

Our proven model shows that S&P Global is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. The Most Accurate estimate for the company stands at $1.58 while the Zacks Consensus Estimate is pegged lower at $1.56. So the difference – the Earnings ESP – is +1.28%. A positive ESP combined with the company’s Zacks Rank #2, makes us reasonably confident of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

S&P Global Inc. Price and EPS Surprise


S&P Global Inc. Price and EPS Surprise | S&P Global Inc. Quote

What’s Driving the Better-than-Expected Results?

S&P Global’s focus on its core business is helping it emerge as a leader among rating providers, benchmark providers and analytics in the global capital as well as commodity markets. It completed several business divestitures in third-quarter 2016 including the sale of J.D. Power, its two pricing businesses SPSE and CMA, and the equity research business. The impact of these divestitures is likely to be seen in its second-quarter results as well.

The company also completed the acquisition of SNL Financial for $2.2 billion. It is a strategic fit for S&P Global as its business is in sync with the S&P Capital IQ and Platts businesses, which will help the company avail cost cuts and revenue synergies. Moreover, it will enable global expansion on a greater scale especially within the banking and insurance sectors while media and real estate areas emerge as new opportunities. The acquisition will generate synergies of $70 million of EBITDA (earnings before interest, tax, depreciation and amortization) by 2019 and a tax benefit (net present value) of $550 million. It will also be accretive to adjusted earnings per share in 2017 and earnings on a GAAP basis in 2018.

During the quarter, the company inked a strategic data agreement with business news provider, Thomson Reuters Corporation TRI to expand its product portfolio. The collaboration is likely to benefit customers of both the companies. According to the terms of the agreement, S&P Global Market Intelligence (a division of S&P Global) will provide transcript coverage of public as well as private companies to Thomson Reuters’ users for enhanced data analysis. This includes complete coverage of firms in the S&P 500 and other leading stock market indices.

We believe that the company’s strategic portfolio restructuring and focus on core business will continue to drive growth, going forward. This apart, strategic acquisitions and positive industry trends will benefit the company in the to-be-reported quarter as well.

Other Stocks to Consider

Here are some other companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

AGCO Corporation AGCO, with an Earnings ESP of +2.89% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agenus Inc. AGEN with an Earnings ESP of +5.56% and a Zacks Rank #2.

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