S&P Global (SPGI) Stock Upgraded To Buy: Here's Why

From the vast universe of business service stocks, today we chose – S&P Global Inc. SPGI – for you to consider. Based in New York, the company offers a profitable investment opportunity driven by steady earnings growth and strong fundamentals.

Over the last 60 days, the company’s estimates have increased from $6.17 per share to $6.32 with six upward revisions. It has also maintained its earnings beat streak for the 22nd straight quarter. In the last quarter, the company comfortably surpassed estimates by 9.6%. Rise in the bottom line came on the back of robust organic revenue growth.  

Owing to its better-than-expected second-quarter results, S&P Global hiked its full-year 2017 adjusted earnings per share (EPS) guidance to $6.15–$6.30 from $6.00–$6.20. On a GAAP basis, EPS is expected to be in the range of $5.83 to $5.98 from the earlier expected range of $5.72−$5.92.

Solid second-quarter results have helped the company earn a Zacks Rank #2 (Buy).

The company has outperformed the industry with an average year-to-date return of 38% compared with a 18.9% gain for the latter. S&P Global started 2017 on an impressive note with notable top line and bottom-line beat. We believe that the company’s strategic portfolio restructuring and focus on core business will continue to drive growth, going forward. This apart, strategic acquisitions and positive industry trends like surge of new high-yield bonds and leveraged loans, fueled by tight interest-rate spreads, augur well for long-term growth.

On May 9, S&P Global inked a strategic data agreement with business news provider, Thomson Reuters Corporation TRI to expand its product portfolio. The collaboration is likely to benefit customers of both the companies. According to the terms of the agreement, S&P Global Market Intelligence (a division of S&P Global) will provide transcript coverage of public as well as private companies to Thomson Reuters’ users for enhanced data analysis. This includes complete coverage of firms in the S&P 500 and other leading stock market indices.

The company completed the acquisition of SNL Financial for $2.2 billion. SNL Financial is a strategic fit for S&P Global and is likely to complement the S&P Capital IQ and Platts businesses, which will help the latter avail cost cuts and revenue synergies. Moreover, it will enable global expansion on a greater scale especially within the banking and insurance sectors while media and real estate areas emerge as new opportunities. SNL Financial has been delivering consistent mid-teens revenue growth for the last 10 years. Also, its subscription-based revenue model with high renewal rates and strong future revenue visibility bodes well for S&P Global. The acquisition is expected to generate synergies of $70 million of EBITDA (earnings before interest, tax, depreciation and amortization) by 2019 and a tax benefit (net present value) of $550 million. We expect these collaborations and acquisitions to bode well to the company’s profits in the years to come.

Other Stocks to Consider

A couple stocks other worth considering in the industry are ManpowerGroup Inc. MAN and TransUnion TRU. Both stocks carry the same Zacks Rank as S&P Global. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ManpowerGroup came up with three positive earnings surprises in the trailing four quarters and has an average positive surprise of 4.5%.

TransUnion pulled off an average positive surprise of 11.8% over the trailing four quarters, beating estimates thrice.

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Thomson Reuters Corp (TRI): Free Stock Analysis Report
 
TransUnion (TRU): Free Stock Analysis Report
 
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ManpowerGroup (MAN): Free Stock Analysis Report
 
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