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S&P Global (SPGI) Q3 Earnings Beat Estimates, Revenue Miss

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S&P Global Inc. (SPGI - Free Report) reported mixed third-quarter 2018 results wherein the company’s earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

Adjusted earnings per share of $2.11 beat the Zacks Consensus Estimate by 10 cents and increased 23.4% on year-over-year basis. The bottom Line benefited from revenue growth, operating leverage, and tax reform.

Revenues of $1.54 billion lagged the consensus mark by $37 million but increased 2.2% year over year. The top line benefited from growth across Market Intelligence, Platts and S&P Dow Jones Indices segments.

So far this year, shares of S&P Global have gained 5% compared with 5.7% rise of the industry it belongs to.

 

Segmental Revenues

Ratings revenues decreased 5% year over year to $700 million. Transaction revenues declined 12% to $328 million due to debt issuance reductions and lower bank loan ratings activity.  Non-transaction revenues increased 1% to $372 million owing to growth in fees associated with surveillance and inter-segment royalties, which was partially offset by lower Rating Evaluation Service activity.

Revenues from the United Statesdecreased 6%. The same decreased 4% internationally due to a decline in Asia Pacific, Latin America and Canada, which was partially offset by growth in EMEA.  Despite the decline, the international segment contributed 43% to total revenues.

Market Intelligence revenues were up 10% year over year to $464 million, primarily driven by growth in Risk Services and Data Management Solutions and mid-single digit organic growth in Desktop. 

Platts revenues increased 5% to $204 million owing to growth in the core subscription business, which was partially offset by a decline in Global Trading Services due to reduced trading volumes in certain commodity products. 

S&P Dow Jones Indices revenues increased 10% to $205 million driven by an increase in asset-linked fees and revenues associated with data and custom subscriptions. Revenues associated with data and custom subscriptions increased 12% and asset-linked fees grew 11%.

Operating Results

Adjusted operating profit increased 11% year-over-year to $767 million. Adjusted operating profit margin increased 380 basis points (bps) to 50%.

Going by segments, Ratings adjusted operating profit increased 1% to $396 million and the adjusted operating profit margin improved 370 bps to 57%.

S&P Dow Jones adjusted operating profit increased 13% to $136 million and adjusted operating profit margin improved 190 bps to 66%. 

For Market Intelligence, adjusted operating profit increased 20% to $168 million.  Adjusted operating profit margin improved 300 bps to 36%.

Platts’ adjusted operating profit increased 15% to $102 million and adjusted operating profit margin improved 440 basis points to 50%.

S&P Global Inc. Price, Consensus and EPS Surprise

 

S&P Global Inc. Price, Consensus and EPS Surprise | S&P Global Inc. Quote

Balance Sheet and Cash Flow

S&P Global exited the third-quarter 2018 with cash, cash equivalents, and restricted cash of $2.20 billion compared with $1.94 billion at the end of the prior quarter. Long-term debt of $3.66 billion was flat with the prior quarter.

The company generated $498 million of cash from operating activities in the reported quarter. Free cash flow was $432 million. Capital expenditures came in at $28 million.

During the reported quarter, the company returned $126 million to shareholders through dividend payment and completed the $1 billion accelerated share repurchase (ASR) agreement (which was started in the first quarter). The company is hopeful of starting a new $500 million ASR, which is expected to continue till Feb 2019.

2018 Guidance

S&P Global tightened its adjusted earnings per share (EPS) guidance for full-year 2018. The company now expects adjusted earnings in the range of $8.50-$8.60 per share compared with $8.45-$8.60 guided earlier. The Zacks Consensus Estimate of $8.48 is below the midpoint of the currently guided range.

Zacks Rank & Upcoming Releases

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

Investors interested in the broader Business Services sector are keenly awaiting earnings reports of key players like Booz Allen Hamilton Holding (BAH - Free Report) , Waste Connections (WCN - Free Report) and First Data . Booz Allen Hamilton will report second-quarter fiscal 2019 results on Oct 29. Waste Connections and First Data will release third-quarter 2018 results on the same day.

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