S&P Global Earnings: OK Financial Results, but Market Was Hoping for Something Better

While S&P Global’s SPGI second-quarter results were mostly in line with consensus, some slight softness in the nonratings businesses appears to be weighing on the stock. Revenue of $3.10 billion was 1% above the FactSet consensus, while adjusted EPS of $3.12 matched the consensus estimate. We view the July 27 pullback as a reflection that shares had appreciated 28% year to date before the earnings release and that investors were hoping for something better than unchanged firmwide revenue and adjusted EPS guidance. We will maintain our wide moat rating and are increasing our fair value estimate to $375 per share from $370 primarily due to the time value of money.

Ratings revenue grew 7% from the year-ago period, a similar pace to Moody’s 6% ratings revenue growth. Adjusted operating margin declined to 57.7% from 59.5% as the firm increased incentive compensation. Given the strong quarter, S&P increased its ratings revenue growth outlook by 1 percentage point at the midpoint to 5%-7%.

Market intelligence—S&P’s largest segment by revenue—grew 6% in the quarter, a slight uptick from 5% growth in the first quarter. S&P adjusted its segment revenue guidance to 6.0%-8.0% growth versus its previous outlook of being on the lower end of its initial 6.5%-8.5% growth range. S&P Global is seeing some impact on its sustainability and environmental, social, and governance business. On a firmwide basis, S&P Global had been expecting to hit $800 million in firmwide sustainability and energy transition revenue by 2026. Now, it is has withdrawn the 2026 timeline, given regulatory uncertainty and the U.S. political climate. S&P Global is also seeing some slowdown in the sales cycles for financial-services end markets, but this appears to be stabilizing.