On Wednesday, Goldman Sachs increased its price target on S&P Global (NYSE:SPGI) shares to $561 from the previous $498, while maintaining a Buy rating on the stock. The firm cited strong second-quarter results that surpassed both their own estimates and the consensus. S&P Global's revenue, EBITDA margins, and earnings per share (EPS) were all highlighted as exceeding expectations, leading to an upward revision of the full-year guidance.
The company's Ratings business was particularly noted for driving this positive revision cycle, benefiting from high debt issuance volumes fueled by refinancing in high-yield and leveraged loans, as well as a surge in issuance activity.
Management has significantly upgraded its full-year 2024 outlook for rated debt issuance, jumping from a 6-10% increase to approximately 25%. This adjustment is expected to result in mid-teens growth in Ratings revenue, up from previous high-single-digit projections.
Goldman Sachs analysts believe there is additional potential for S&P Global's Ratings revenue guidance to rise, influenced by anticipated rate cuts and an increase in mergers and acquisitions (M&A) activity.
Furthermore, S&P Global's non-Ratings divisions are collectively continuing to achieve robust high-single-digit revenue growth. This is led by the Indices and Commodity Insights segments, which are experiencing double-digit growth.
The firm's optimistic view extends to several factors that are likely to contribute to the growth of S&P Global's shares. These include an improving cyclical outlook for Market Intelligence, increased assets under management (AUM) from fund inflows into S&P-linked indices, the ongoing realization of merger revenue synergies, and benefits accruing from the company's Gen AI initiative.
These elements, combined with the tailwinds from debt issuance, are expected to provide a strong upside for the company's stock. Goldman Sachs reaffirmed its Buy rating and adjusted the 12-month price target to reflect the positive developments.
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