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S&P Global (SPGI) Beats Q3 Earnings & Revenues, View Up

Maintaining its earnings beat streak for the 24th straight quarter, S&P Global, Inc. SPGI reported solid third-quarter 2017 results with adjusted net income of $442 million or $1.71 per share compared with $381 million or $1.43 per share in the year-earlier quarter. Earnings comfortably beat the Zacks Consensus Estimate of $1.52. Rise in the bottom-line came on the back of robust organic revenue growth.

GAAP earnings for the quarter were $414 million or $1.61 per share compared with $892 million or $3.36 per share in the year-ago quarter. The significant year-over-year decrease in earnings was primarily due to a pre-tax gain of $722 million on the sale of J.D. Power in third-quarter 2016.

Revenues for the quarter were $1,513 million compared with $1,439 million in the year-ago quarter. Quarterly revenues beat the Zacks Consensus Estimate of $1,442 million. Top-line growth was fueled by solid performance across all its segments. Adjusted operating profit margin improved 190 basis points to 46% due to solid organic revenue growth, sale of lower margin businesses and productivity initiatives.

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

 

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

Segmental Details

S&P Global Ratings segment’s revenues increased 15% year over year to $739 million, chiefly driven by increase in transaction revenues. The growth came on the back of substantial increase in high-yield bond, bank loan ratings and contract terms. Moreover, non-transaction revenue increased 7% to $367 million driven by growth in fees associated with surveillance, entity ratings and short-term debt. Adjusted operating profit remained increased 19% year over year to $392 million for adjusted operating margin of 53% (up 170 bps year over year).

S&P Global Market and Commodities Intelligence revenues declined 6% year over year to $615 million due to the sale of J.D. Power, the SPSE/CMA pricing businesses, and Equity and Fund Research last year. However, the segment’s adjusted operating profit increased 1% to $230 million, while adjusted operating profit margin increased 270 basis points to 37% led by strong organic revenue growth, divestments of lower margin businesses, and SNL integration synergies.

S&P Dow Jones Indices revenues rose 14% to $187 million in the reported quarter, mainly attributable to growth in asset-linked fees. Adjusted operating profit increased 10% to $120 million while adjusted operating profit margin decreased 190 basis points to 64% owing to higher performance-driven costs and additional investments.

Financial Aspects

As on Sep 30, 2017, S&P Global had cash and cash equivalents of $2,312 million while long-term debt was $3,568 million. During the first nine months of 2017, the company generated cash from operating activities to the tune of $1,203 million compared with $1,257 million in the year-ago period.

During the quarter, the company returned $604 million to shareholders. This was done through a combination of share repurchases and dividend payouts. It paid out $104 million in dividends and bought 2.8 million shares for $500 million.

Guidance Up

Concurrent with the earnings release, the company hiked its full-year 2017 adjusted earnings per share (EPS) guidance to $6.55–$6.70 from $6.15–$6.30. On a GAAP basis, EPS is expected to be in the range of $6.19 to $6.34 from the earlier expected range of $5.83−$5.98.

S&P Global currently holds a Zacks Rank #2 (Buy). Other stocks worth reckoning in the industry include Black Knight, Inc. BKI, FactSet Research Systems Inc. FDS and TransUnion TRU, each carrying Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Black Knight has a long-term earnings growth expectation of 13.5%. It has beaten earnings estimates twice in the trailing four quarters with an average positive surprise of 2.4%.

FactSet Research has a long-term earnings growth expectation of 10.8%. It has beaten earnings estimates in each of the trailing four quarters with an average positive surprise of 1.1%.

TransUnion has a long-term earnings growth expectation of 10%. It has beaten earnings estimates in each of the trailing four quarters with an average positive surprise of 10.6%.

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FactSet Research Systems Inc. (FDS): Free Stock Analysis Report
 
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