S&P Global (SPGI) Q3 Earnings & Revenues Beat Estimates

S&P Global, Inc. (NYSE:SPGI) reported third-quarter 2016 adjusted earnings per share of $1.43, which surged 17% from the year-ago quarter and beat the Zacks Consensus Estimate of $1.35.

Revenues advanced 9% to $1,439 million, beating the Zacks Consensus Estimate of $1,416 million. Top-line growth was primarily supported by strong performances across S&P Global Ratings and S&P Global Market Intelligence.

Adjusted operating profit margin expanded 320 basis points (bps) to 44.4%.

Segment Details

S&P Global Ratings segment revenues increased 9% year over year to $642 million, chiefly driven by increase in transaction revenues. Adjusted operating profit surged 17% to $330 million while adjusted margin expanded 330 bps to 51%.

Transaction revenues, which include ratings of publicly issued debt and bank loan as well as corporate credit estimates, jumped 23% year over year to $299 million, mainly owing to an improvement in bond issuance, contract terms, bank loan ratings as well as the U.S. public finance issuance.

However, non-transaction revenues, which include annual contracts, surveillance fees and subscriptions, came in at $343 million, flat year over year. Strength in surveillance fees was overshadowed by decrease in Rating Evaluation Service fees.

Region-wise, the segment’s domestic and international revenues were up 9% and 10%, respectively.

S&P Global Market Intelligence reported revenue growth of 21% year over year to $429 million. The segment’s adjusted operating profit soared 43% to $135 million, primarily due to the SNL acquisition as well as progress on integration-related synergies. On the other hand, adjusted operating margin expanded 480 basis points to 31%.

S&P Dow Jones Indices revenues rose 6% to $164 million in the reported quarter. The segment’s adjusted operating profit increased 1% to $108 million.

S&P Global Platts segment revenues declined 8% year over year to $229 million, comprising J.D. Power results through Sep 7, 2016. The segment’s adjusted operating profit was down 4% to $94 million.

Financial Aspects

S&P Global ended the quarter with cash and equivalents of $2,399 million and long-term debt of $3,563 million. The company incurred capital expenditures of $67 million and generated free cash flow from continuing operations of $1,045 million during the first nine months of 2016.

Further, during the third quarter, S&P Global returned $845 million to shareholders, which comprised $750 million under the accelerated share repurchase (ASR) program and $95 million through dividends.

Outlook

The company expects earnings for 2016 in the band of $5.15–$5.25 per share compared with the previous estimate of 5.05–$5.20. The Zacks Consensus Estimate is currently pegged at $5.22 per share.

Zacks Rank

S&P Global currently carries a Zacks Rank #2 (Buy). Some other stocks which warrant a look in the sector include TransUnion (NYSE:TRU) , Verisk Analytics, Inc. (NASDAQ:VRSK) and Core-Mark Holding Company, Inc. (NASDAQ:CORE) . All these stocks have the same rank as S&P Global. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

TransUnion has surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 10%.

Verisk Analytics has an impressive long-term earnings growth rate of 11.8%.

Core-Mark Holding delivered positive earnings surprises in the last three quarters and witnessed positive estimate revisions for 2016 over the past 60 days.

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