S&P Global’s Non-Ratings Business Continues to Grow as Core Business Declines

Wide moat-rated S&P Global reported a decent third quarter. Revenue missed consensus expectations by 2%, which we attribute to ratings weakness while adjusted EPS beat by 5% amid healthy operating margins. S&P Global saw pro forma revenue decline 8% in the third quarter, driven by a 33% decline in ratings revenue. Non-ratings business grew 4% in the quarter. The ratings revenue decline was mostly expected given Moody's recent results and weak bond issuance. As we lower our near- and medium-term ratings revenue assumptions, we are lowering our fair value estimate on S&P Global to $370 from $380.