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TRU or SPGI: Which is the Better Stock Post Q4 Earnings?

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The earnings season is at its tail end with about 398 S&P 500 companies having reported results till Feb 16, 2018. Various analysis and comparisons are being done by industry peers to gauge the underlying metrics and relative performance. Let us perform a similar analysis of two leading players in the Business Services sector to pick the best investment option based on the fourth-quarter 2017 earnings scorecard.

Fourth-Quarter Earnings

TransUnion (TRU - Free Report) reported strong results with healthy year-over-year increase in revenues and earnings on the back of attractive new product launches, rapid vertical growth and solid performance in the international markets. Adjusted earnings for the quarter were $94.8 million or 50 cents per share compared with $81.6 million or 44 cents per share in the year-earlier quarter. The bottom line beat the Zacks Consensus Estimate by a penny. GAAP earnings for the reported quarter were $245.1 million or $1.29 per share compared with $49.5 million or 27 cents per share in the year-ago quarter. The surge was aided by benefits from the newly enacted tax law.

Total quarterly revenues came in at $506.1 million compared with $435.9 million in the year-ago quarter. It surpassed the Zacks Consensus Estimate of $488 million. This healthy top-line growth was aided by strong year-over-year rise in revenues in each of the business segments. TransUnion carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

S&P Global, Inc. (SPGI - Free Report) reported solid results with adjusted net income of $474 million or $1.85 per share compared with $334 million or $1.28 per share in the year-earlier quarter. Earnings comfortably beat the Zacks Consensus Estimate of $1.63. The rise in the bottom line came on the back of robust organic revenue growth across all segments. GAAP earnings for the quarter were $263 million or $1.02 per share compared with $537 million or $2.05 per share in the year-ago quarter. The significant year-over-year decrease in earnings was primarily due to gains culminated in the prior-year quarter from business divestitures. Moreover, tax expenses incurred due to the enactment of the Tax Cuts and Jobs Act in fourth-quarter 2017 further reduced earnings.

Revenues for the quarter were $1,589 million compared with $1,399 million in the year-ago quarter. Quarterly revenues beat the Zacks Consensus Estimate of $1,503 million. Top-line growth was fueled by solid performance across all segments. S&P Global carries a Zacks Rank #2.

Guidance

Concurrent with the earnings release, TransUnion provided bullish 2018 outlook. For full-year 2018, revenues are likely to be between $2.12 billion and $2.14 billion, representing a 9-10% increase on a constant currency basis. Adjusted earnings per share are expected to be between $2.26 and $2.31, an increase of 20-23% year over year.

S&P Global also provided bullish full-year 2018 guidance. Adjusted earnings are expected to be $8.45-$8.60 per share. On a GAAP basis, EPS is expected to be in the range of $8.15 to $8.30. Also, free cash flow of $2.3 billion is expected.

Price Performance

In the last three months, TransUnion has underperformed the industry with an average return of 6.2% compared with 7.5% gain for the latter. S&P Global has outperformed the industry with an average return of 15.6% during the same time frame.



Estimate Revisions

Over the last 30 days, TransUnion’s current-quarter estimates increased to 51 cents per share from 48 cents while that for the current year increased from $2.15 to $2.30.

S&P Global’s current-quarter estimates increased to $1.97 per share from $1.77 while that for the current year increased from $7.44 to $8.52.

To Sum Up

Based on the current scenario, although there is not much to choose from as the stocks seem to match on most counts, S&P Global seems to have trumped TransUnion on the basis of positive estimate revisions and price performance and stands out as a better investment option.

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