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S&P Global (SPGI) Beats Q2 Earnings Estimates, Ups EPS View

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S&P Global Inc. (SPGI - Free Report) reported better-than-expected second-quarter 2020 results.

Adjusted earnings per share of $3.40 beat the consensus mark by 23.2% and improved 40% year over year on the back of revenue growth in S&P Global Ratings and reduced expenses from COVID-19-related management actions. Revenues of $1.94 billion beat the consensus estimate by 7.6% and improved 14% year over year.

So far this year, shares of S&P Global have gained 28.6%, ahead of the 16.1% growth of the industry it belongs to and 0.7% increase of the Zacks S&P 500 composite.

 

Let’s check out the numbers in detail.

Segmental Revenues                     

Ratings revenues of $1 billion increased 26% year over year owing to solid global investment-grade issuance, including record quarterly U.S. investment-grade issuance.  Transaction revenues increased 48% to $624 million owing to an increase in global bond issuance, partially offset by decreased bank loan rating activity.  Non-transaction revenues grew 1% to $382 million. 

Market Intelligence revenues were up 6% year over year to $516 million, primarily driven by growth in Data Management Solutions, Credit Risk Solutions, and Desktop and the inclusion of 451 Research.

Platts revenues rose 2% to $217 million, backed by growth in both core subscription business and Global Trading Services.

S&P Dow Jones Indices revenues increased 2% to $240 million, driven by 20% growth in exchange-traded derivative fees and 6% increase in data and custom subscriptions.

Operating Results

Adjusted operating profit margin improved 740 basis points (bps) to 58.7%, owing to revenue growth in S&P Global Ratings and reduced expenses from coronavirus-related management actions.

Segment wise, Ratings adjusted operating profit increased 47% to $695 million. Adjusted operating profit margin improved 1,020 bps to 69.1%.

Market Intelligence adjusted operating profit improved 13% to $177 million. Adjusted operating profit margin improved 220 bps to 34.4%.

Platts’ adjusted operating profit increased 9% to $127 million and adjusted operating profit margin increased 400 bps to 58.3%.

S&P Dow Jones adjusted operating profit increased 5% to $172 million. Adjusted operating profit margin improved 210 bps to 71.9%.

SP Global Inc. Price, Consensus and EPS Surprise

SP Global Inc. Price, Consensus and EPS Surprise

SP Global Inc. price-consensus-eps-surprise-chart | SP Global Inc. Quote

Balance Sheet and Cash Flow

S&P Global exited second-quarter 2020 with cash, cash equivalents, and restricted cash of $2.68 billion compared with $1.95 billion at the end of the prior quarter.

The company generated $937 million of cash from operating activities in the reported quarter. Free cash flow was $889 million.

During the reported quarter, the company did not repurchase any new shares. Its existing ASR program was in place and it was completed on Jul 27. The company paid $162 million in dividends. 

2020 Guidance

S&P Global raised its full-year adjusted EPS guidance to the range of $10.75-$10.95 from the prior guidance of $9.95-$10.15. The current Zacks Consensus Estimate of $10.26 lies below the updated guidance range.

Currently, S&P Global carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

Equifax Inc. (EFX - Free Report) reported better-than-expected second-quarter 2020 adjusted earnings of $1.60 per share, whichbeat the Zacks Consensus Estimate by 22.1% and improved 14.3% on a year-over-year basis. The reported figure exceeded the guided range of 78-88 cents.

IQVIA Holdings, Inc. (IQV - Free Report) reported second-quarter 2020 adjusted earnings per share of $1.18, which beat the consensus mark by 12.4% but decreased 22.9% on a year-over-year basis. The reported figure lies within the guided range of $1.00-$1.09.

Robert Half (RHI - Free Report) reported second-quarter 2020 earnings of 41 cents per share beat the consensus mark by 17% but were down 58% year over year.

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