S&P Global Earnings: Solid Revenue Trends, Outlook Narrowed

In our view, S&P Global SPGI generally reported a healthy third quarter. Revenue of $3.09 billion and adjusted EPS of $3.21 beat the FactSet consensus estimate by 2% and 6%, respectively. The ratings business is rebounding, and the firm’s subscription businesses are proving resilient and in some cases are accelerating. With one quarter left to 2023, S&P narrowed its firmwide revenue outlook but kept its midpoint unchanged. We will maintain our wide moat rating and as we tweak our revenue estimates higher, we are increasing our fair value estimate to $385 from $375 on S&P Global’s shares.

The ratings business, S&P’s largest profit driver, saw revenue increase 20%, a touch better than the 18% reported by peer Moody’s. Structured finance revenue of $104 million, while only 13% of S&P ratings revenue in the quarter, was a bright spot in our view and we noted that it edged out Moody’s $102 million. In the structured finance market, market share can be lumpy, but historically S&P has lagged Moody’s, so we find S&P’s result encouraging.

Market Intelligence, S&P’s largest segment by revenue, grew 8%, an increase from 6% in the previous quarter and a good result given macroeconomic uncertainty and some revenue deceleration at peer FactSet. Commodity insights revenue growth accelerated to 11% from 8% against a backdrop of rising commodity prices. We find this encouraging, as the rising commodity prices in early 2022 didn’t provide the revenue boost we had expected. S&P’s mobility business, which includes Carfax, continues to grow steadily at 10%.

S&P Global narrowed its adjusted 2023 revenue guidance. Organic revenue is expected to grow 4.5%-5.5% (previous: 4.0%-6.0%) and adjusted EPS outlook was increased to $12.50-$12.60 (previous: $12.35-$12.55). Market intelligence and mobility guidance was narrowed, but the midpoint was unchanged, while ratings revenue and commodity insights saw its midpoint outlook edge higher.