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S&P Global (SPGI) Surpasses Q4 Earnings & Revenue Estimates

Zacks Equity Research
·4 min read

S&P Global Inc. SPGI reported better-than-expected fourth-quarter 2020 results.

Adjusted earnings per share of $2.71 beat the consensus mark by 6.3% and improved 7% year over year on the back of a 2% decrease in the average diluted shares outstanding. .

Revenues of $1.87 billion beat the consensus estimate by 6.5% and improved 8% year over year.

Let’s check out the numbers in detail.

Segmental Revenues                     

Ratings revenues of $881 millionincreased 7% year over year. Organic revenue growth was 5%. Non-transaction revenues grew 15% to $451 million, owing to increased activity associated with surveillance, frequent issuer programs, Rating Evaluation Service and new entity ratings and revenues from the acquisitions of Greenwich Associates by CRISIL and the ESG Ratings Business from RobecoSAM.  Transaction revenues remained relatively unchanged at $430 million as rise in bank loan ratings revenues was partially offset by fall in bond issuance

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Market Intelligence revenues were up 8% year over year to $542 million, primarily driven by growth in Data Management Solutions, Credit Risk Solutions, and Desktop and the inclusion of 451 Research.

Platts revenues rose 5% to $223 million, backed by growth in the core subscription business, partially offset by decreased Global Trading Services activity. 

S&P Dow Jones Indices revenues increased 10% to $257 million, backed by increased asset-linked fees.

Operating Results

Adjusted operating profit margin grew 4% year over year to $903 million.

Segment wise, Ratings adjusted operating profit increased 1% to $481 million. Adjusted operating profit margin declined 370 bps to 54.7%.

Market Intelligence adjusted operating profit increased 2% to $166 million. Adjusted operating profit margin decreased 160 bps to 30.7%.

Platts’ adjusted operating profit increased 3% to $115 millionand adjusted operating profit margin decreased 100 bps to 51.7%.

S&P Dow Jones adjusted operating profit increased 11% to $176 million. Adjusted operating profit margin improved 50 bps to 68.5%.

Balance Sheet and Cash Flow

S&P Global exited fourth-quarter 2020 with cash, cash equivalents and restricted cash of $4.12 billion compared with $3.17 billion at the end of the prior quarter. Long-term debt was $4.11 billion, flat sequentially.

The company generated $1.14 billion of cash from operating activities in the reported quarter. Free cash flow was $33 million.

On Jan 27, 2021, S&P Global's board of directors declared a dividend hike of 15%, thereby raising the quarterly cash dividend from 67 cents per share to 77 cents. The new dividend will be paid on Mar 10, 2021, to shareholders of record on Feb 24, 2021. The new annualized dividend rate is $3.08 per share.

During 2020, the company returned $1.8 billion to shareholders.  This included $1.2 billion through share repurchases and $645 million through dividend payments. 

2021 Guidance

S&P Global unveiled its full-year adjusted EPS guidance in the range of $12.25-$12.45. The current Zacks Consensus Estimate of $11.84 lies below the updated guidance range.

Free cash flow is anticipated between $3.3 billion and $3.4 billion.

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

Rollins’ ROL fourth-quarter 2020 adjusted earnings of 13 cents per share came ahead of the consensus estimate as well as the year-ago figure by 18.2%. Revenues of $536.3 million beat the consensus mark by 1.7% and improved 6% year over year.

IHS Markit’s INFO fourth-quarter fiscal 2020 adjusted earnings per share of 72 cents beat the Zacks Consensus Estimate by 7.5% and increased 11% on a year-over-year basis. Total revenues came in at $1.11 billion, marginally missing the consensus mark and declining 1% from the year-ago quarter on a reported basis.

Automatic Data Processing’s ADP second-quarter fiscal 2021 adjusted earnings per share of $1.52 beat the consensus mark by 17.8% and were flat year over year. Total revenues of $3.69 billion beat the consensus mark by 3.2% and improved 0.7% year over year.

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