S&P Global Inc. (SPGI - Free Report) has an impressive Growth Score of A. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth.
The company has an expected long-term earnings per share (three to five years) growth rate of 10%. Further, earnings are anticipated to register 15.3% growth in fiscal 2020 and 4.5% in fiscal 2021.
Shares of S&P Global have gained 26.4% year to date against 4.6% decline of the industry it belongs to.
Revenue Growth, Cost Reductions are Key Tailwinds
S&P Global’s top line remains in very good shape. Amid the pandemic, successful operations from remote locations coupled with productivity programs have kept the demand environment strong. In the second quarter of 2020, revenues of $1.94 billion increased 14% year over year, driven by strength across all four divisions – Ratings, Global Market Intelligence, Dow Jones Indices and Platts.
The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.71 billion, indicating year-over-year growth of 1.1%. The recent acquisition of ESG Ratings Business (from RobecoSAM) should boost the company’s position as a premier resource for essential ESG data, ratings, benchmarks and insights. Another acquisition, Greenwich Associates, is expected to expand its offerings across financial services including commercial banks, and asset and wealth managers.
S&P Global is benefiting from cost-reduction measures to counter pandemic-related headwinds. Such measures include hiring freeze, reduction in travel, advertising and promotion expenses, and lowered use of outside professional services. Cost-reduction efforts, along with revenue strength, have helped the company improve its adjusted earnings by 23.3% in the second quarter of 2020. Such momentum is expected to continue in the third quarter as well, with the Zacks Consensus Estimate pegged at $1.71 billion, indicating year-over-year growth of 0.8%.
Debt-laden Balance Sheet is a Concern
S&P Global’s total debt at the end of second-quarter 2020 was $4.5 billion, same as what it was at the end of the prior quarter. Total debt to total capitalization ratio of 0.94 was higher than the industry’s 0.60. A high debt-to-capitalization ratio indicates higher risk of insolvency in challenging times.
Further, the company’s cash and cash equivalent of $2.7 billion at the end of the second quarter was well below the debt level, underscoring that it doesn’t have enough cash to meet debt burden.
Zacks Rank and Stocks to Consider
S&P Globalcurrently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader Zacks Business Services sector are BG Staffing (BGSF - Free Report) , CoreLogic (CLGX - Free Report) and Sykes Enterprises (SYKE - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings (three to five years) growth rate for BG Staffing, CoreLogic and Sykes Enterprise is estimated at 20%, 12% and 8%, respectively.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>