On 4/29, S&P Global announced impressive Q1 earnings with EPS up 24%. Key takeaways are:
- Revenue up 13% to $2.0b
- Expense growth of 2% and operating margins increased 450 basis points!
- All four businesses grew revenue and increased operating margins
Current Price: $391.69 Price Target: $450 (increased from $410)
Position Size: 2.88% Performance since add on 2/3/21: +21.0%
2021 Q1 Highlights:
- Ratings
- Revenue grew 23% and operating profit rose +32%
- Margins increased 440 bps to 67.5% (after rising 450bps last quarter!)
- Global bond issuance up a healthy +9% with surging bank loans +70% and High Yield +111% issuance
- No S&P rated investment-grade issuer defaulted in 2020
- Market Intelligence
- Revenue grew 4% Operating profit rose +13%
- Margins increased 260 bps to 33.5%
- Platts
- Revenue grew 5% and operating profit rose +15%
- Margins increased 520 bps to 58.1%
- S&P Dow Jones Indices
- Revenue grew 4% and operating profit rose 7%
- Margins increased 70 bps to 71.3%
Growth initiatives
- Implementing ESG offerings across platform – ESG revenues up 40%
- China analytic platform – 22 ratings in 2020 and 18 ratings this quarter
- 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
- SPGI has a current yield of .79%
- SPGI has repurchased 14% of outstanding shares over past 5 years
- Currently, share buybacks are on hold with the pending merger of IHS Markit. SPGI has $4.5b of cash piled up on the balance sheet. Expect majority to be returned to shareholders 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.
Please let me know if you have any questions.
Thanks,
John
$SPGI.US
John R. Ingram CFA
Chief Investment Officer
Partner
Direct: 617.226.0021
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109