S&P Global Hits New 52-Week High On Strong Growth Drivers

Shares of business services provider S&P Global Inc. (NYSE:SPGI) hit a new 52-week high of $193.50 on Jun 7, before closing the trading session considerably lower at $146.01, for a healthy year-to-date return of 35.8%.

S&P Global’s share price has been on a steady uptrend since Jan 1. In the last one month, the stock has been on a significant uptrend. Owing to its strong price appreciation, this stock carries a Zacks Rank #2 (Buy). The stock currently has a long-term earnings growth expectation of 12.33%.

Growth Drivers

S&P Global is focusing on its core business, which 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 was seen in its first-quarter results as well.

The company 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 as 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.

SNL Financial delivered consistent mid-teens revenue growth for the last 10 years. Also, the company’s subscription-based revenue model with high renewal rates and strong future revenue visibility bodes well for S&P Global.

The company has outperformed the Business Information Services industry over the past three months with an average return of 11.4% compared with a gain of 4% for the latter. S&P Global has been consistently impressing investors with its earnings performance over the last 16 quarters. It reported better-than-expected earnings in the first quarter as well, posting an earnings beat of 15.7%.

On May 9, the company inked a strategic data agreement with business news provider, Thomson Reuters Corporation (TO: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.

Other Stocks to Consider

A couple stocks in the industry worth considering include CoStar Group, Inc. (NASDAQ:CSGP) and EPAM Systems, Inc. (NYSE:EPAM) , both carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CoStar Group has a healthy long-term earnings growth expectation of 17.5%. It reported a trailing four quarter average positive earnings surprise of 11.3%.

EPAM Systems has a solid long-term earnings growth expectation of 20%. It delivered a trailing four quarter average positive earnings surprise of 3.2%.

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