- S&P Revenue up 12% with solid growth in all four segments
- Generated $3.5b in free cash flow, yielding 3.72%
- Operating margins expanded 190 basis points to 53.2%
- Expect IHS Markit merger to close Q1 2022.
- Raising slight market angst, SPGI did not issue guidance for 2022 as they will wait until after mergers closes.
Current Price: $407.29 Price Target: $480
Position Size: 2.82% 12 Month Performance: +23.7%
2021 Q4 Highlights:
- S&P Dow Jones Indices
- Asset-linked fees ETF AUM increased up 40%!
- Revenues benefited from strong price appreciation and inflows
- Revenue grew 16% and operating profit rose 17% Y/Y
- Margins rose +80 bps to 69.9%
- Ratings
- Global bond issuance increased 15%, with strong growth in high yield, Bank Loans and CLOs
- YoY revenue grew 14% and operating profit rose +17%
- Margins rose +180 bps to 64.2%
- Non-transaction revenue (not related to bond issuance) is over 40% of ratings revenue
- Market Intelligence
- Revenue grew +7% Operating profit rose +13%
- Margins increased +190 bps to 34.3%
- Platts
- Revenue grew +8% and operating profit rose +9%
- Margins increased +40 bps to 55.1%
IHS Markit merger update
- IHS Markit will divest OPIS, Coal, Metals & Mining (CMM), and PetroChem Wire businesses to News Corp and Base Chemicals business
- S&P Global will divest CUSIP Global Services and Leveraged Commentary and Data, together with a related family of leveraged loan indices.
- Despite divestitures, S&P has raised cost synergies to $530m-$580m (from $480m) and revenue synergies to $330m-$360m (from $350m)
Growth initiatives
- Implementing new ESG offerings across platform – ESG revenues up 40%
- Technology expertise – Kensho AI initiatives
- RiskGuage, ProSpread, Riskcasting Indices, Moonshot index, Kensho Scribe and many others combining data and analytics
- Merger with IHS Markit
Capital allocation
- SPGI has a current yield of .78%
- 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 $6.5b of cash piled up on the balance sheet and generated $3.5b in free cash in 2021. Expect ~85% to be returned to shareholders post-merger. Could repurchase 5%-6% of shares!
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
[category Equity Earnings]
[tag SPGI]
$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