S&P Global’s Q4 Results

On 2/9, S&P Global announced impressive Q4 earnings with EPS up 23% for 2020.  Key takeaways are: 

• Revenue up 11% to $7.4b with organic revenue growth up 10% 
• All four businesses grew revenue and operating profit 
• Generated $3.3b in free cash flow 
• Returned $1.8b to shareholders 

 

Current Price: $337.90                    Price Target: $410 

Position Size:   2.5%                         Performance since add on 2/3/21: +4.2%  

 

2020 Highlights: 

• Ratings  

• Revenue grew 16% with organic revenue 15% 
• Operating profit +25% 
• Margins increased 460 bps to 62.4% 

• Market Intelligence 

• Revenue grew 8% with organic revenue 7% 
• Operating profit +9% 
• Margins increased 30 bps to 32.4% 

• Platts  

• Revenue grew 4% with organic revenue 4% 
• Operating profit +8% 
• Margins increased 230 bps to 54.7% 

• S&P Dow Jones Indices 

• Revenue grew 8% with organic revenue 8% 
• Operating profit 7% 
• Margins decreased 40 bps to 69.1% 

 

Growth initiatives 

• Implementing ESG offerings across platform  
• China analytic platform – 22 ratings in 2020 
• Technology expertise – Kensho AI initiatives 
• RiskGuage, ProSpread, Riskcasting Indices, Moonshot index, Kensho Scribe and many others combining data and analytics 
• Merger with IHS Markit remains on track for closure in second half of 2021 
  

Capital allocation 

• S&P returned $2.8b to shareholders in 2020.  Their stock dividend yields .79% and with stock buybacks has a shareholder yield 2.2% 
• Given the pending merger of HIS Markit share repurchases are on hold.  Cash on balance sheet has grown from $2.8b to $4.1b, which bodes well for stock purchases in the second half of the year post merger. 

 

S&P Global Investment Thesis: 

• S&P Global is a highly profitable company that has established businesses with deep moats in attractive industries 
• S&P Global is focused on shareholders and returns 75% of free cash flow in dividends and share buybacks 
• Over the past several years, S&P Global has demonstrated an enviable history of revenue growth and margin expansion 
• With the merger of IHS Markit, S&P Global will combine many unique data sources, enhance data analytics capabilities, and broaden addressable markets.