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Why Is S&P Global (SPGI) Down 3.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for S&P Global (SPGI - Free Report) . Shares have lost about 3.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is S&P Global due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

S&P Global Surpasses Q4 Earnings & Revenue Estimates

S&P Global reported better-than-expected fourth-quarter 2021 results.

Adjusted earnings per share of $3.15 beat the consensus mark by 0.6% and improved 16% year over year on the back of solid revenue growth and productivity improvements. Revenues of $2.09 billion beat the consensus estimate by 2.1% and improved 12% year over year, backed by strength across every segment.

Segmental Revenues                     

Ratings revenues increased 12% year over year to $989 million. Transaction revenues grew 18% year over year to $504 million, owing to strength in investment-grade corporate bonds, bank loans and structured products. Non-transaction revenues improved 7% year over year to $485 million owing to fees associated with surveillance, CRISIL, and new-entity credit ratings.

Market Intelligence revenues were up 8% year over year to $584 million, primarily driven by growth in Data Management Solutions, Credit Risk Solutions and Desktop.

Platts revenues rose 12% year over year to $249 million, backed by growth in core subscription business and increased Global Trading Services activity.

S&P Dow Jones Indices revenues grew 18% to $303 million, backed by strength across asset-linked fees and exchange-traded derivative activity.

Operating Results

Adjusted operating profit margin grew 18% year over year to $570 million. Adjusted operating profit margin increased 300 basis points (bps) to 57.6%.

Segment wise, Ratings’ adjusted operating profit improved 17% to $645 million while adjusted operating profit margin increased 160 bps to 63.4%.

Market Intelligence’s adjusted operating profit increased 15% to $191 million and adjusted operating profit margin improved 200 bps to 32.7%.

Platts’ adjusted operating profit increased 8% to $125 million and adjusted operating profit margin decreased 160 bps to 50.1%.

S&P Dow Jones’ adjusted operating profit increased 13% to $199 million. Adjusted operating profit margin decreased 280 bps to 65.7%.

Balance Sheet and Cash Flow       

S&P Global exited fourth-quarter 2021 with cash, cash equivalents and restricted cash of $6.51 billion compared with $5.91 billion at the end of the prior quarter. Long-term debt was $4.11 billion, flat sequentially.

The company generated $940 million of cash from operating activities in the reported quarter. Capital expenditures were $2 million. Free cash flow was $846 million.

During the reported quarter, S&P Global returned $186 million to shareholders in the form of dividend payment.  However, it did not repurchase any share during 2021 due to the pending merger with IHS Markit.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -10.91% due to these changes.

VGM Scores

At this time, S&P Global has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, S&P Global has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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