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S&P Global (SPGI) Gains From Acquisitions Despite High Debt

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S&P Global, Inc. (SPGI - Free Report) is currently benefiting from contributions from acquisitions and strength across every segment, except the Ratings division.

SPGI recently reported  lower-than-expected first-quarter 2022 results. Adjusted earnings per share (excluding $1.58 from non-recurring items) of $2.89 missed the consensus mark by 3.7% and decreased 14.8% year over year. Revenues of $2.39 billion missed the consensus estimate by 15.7% but improved 18.5% year over year.

How is S&P Global Doing?

Acquisitions act as a key growth catalyst for S&P Global, helping it continuously innovate, increase differentiated content and develop new products. On Feb 28, 2022, SPGI announced the completion of its merger with IHS Markit. The buyout is expected to enhance SPGI’s data and analytics offerings. It is anticipated to be accretive to its earnings by the end of the second year post closure. On Jan 4, 2022, S&P Global announced that it completed the acquisition of The Climate Service.  The deal is expected to enhance SPGI's portfolio of essential environmental, social, and governance (ESG) insights and solutions’ capabilities. This should help it modify its climate data, models and analytics-related offerings. In 2020, S&P Global completed the acquisitions of ESG Ratings Business (from RobecoSAM) and Greenwich Associates LLC. While ESG Ratings Business will boost SPGI’s position as a premier resource for the essential ESG data, ratings, benchmarks and insights, Greenwich will complement its existing portfolio of products and expand its offerings to new segments across financial services, including commercial banks, and asset and wealth managers. Going ahead, we expect S&P Global to continue adding its advanced technology and data sets through acquisitions, which in turn, should boost its top- and the bottom line.

S&P Global’s cash, cash equivalents and restricted cash of $4.40 billion at the end of first-quarter 2022 was well below its long-term debt of $11.33 billion. Further, SPGI’s current ratio (a measure of liquidity) at the end of the reported quarter was pegged at 1.38, lower than the current ratio of 2.31 reported at the end of fourth-quarter 2021 and the prior-year quarter’s 1.85. Decreasing current ratio is not desirable as it indicates possible problems in meeting the short-term debt obligations.

Zacks Rank and Stocks to Consider

S&P Global currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Business Services sector that investors can consider are Cross Country Healthcare (CCRN - Free Report) , Gartner (IT - Free Report) and Avis Budget (CAR - Free Report) , each carrying a Zacks Rank #1 at present.

Cross Country Healthcare has an expected earnings growth rate of 49.4% for the current year. CCRN has a trailing four-quarter earnings surprise of 29.2%, on average.

Cross Country Healthcare has a long-term earnings growth rate of 6.9%.

Gartner’s shares have risen 5.6% in the past year. IT delivered a trailing four-quarter earnings surprise of 24.2%, on average.

The Zacks Consensus Estimate for Gartner's earnings in the current year has moved up 9.8% in the past 90 days.

Avis Budget has an expected earnings growth rate of 59.8% for the current year. CAR delivered a trailing four-quarter earnings surprise of 102.1%, on average.

Avis Budget has a long-term earnings growth rate of 19.4%.