S&P Global Inc. SPGI stock has had an impressive run in the past year. Shares of the company have gained 41.4% compared with the 30.6% and 33.6% growth of the industry and the Zacks S&P 500 composite, respectively.
One Year Price Performance
Image Source: Zacks Investment Research
The company’s revenues are expected to increase 9.3% and 7.3% in 2024 and 2025, respectively, year over year. Earnings are estimated to increase 15.6% in 2024 and 10.9% in 2025. The company has an expected long-term (three to five years) earnings per share growth rate of 12.3%.
Factors That Augur Well for SPGI’s Success
S&P Global benefits from the rising demand for business information services. The demand for improved enterprise-wide financial performance is led by the increasing volume of data from private and government organizations. Rising demand for news, information and analytics solutions is set to drive market growth. Furthermore, surging demand for risk mitigation is benefiting the industry. Accurate market and financial information is required for risk mitigation and that spurs demand for business information services.
SPGI has been leveraging generative AI (gen-AI) to provide customers with more effective tools, which boosts its customer base. The company introduced Chat AI, powered by gen-AI, which allows users to find necessary data via conversational queries. Another tool that uses gen-AI is the Transcript summarization within the Cap IQ Pro. This helps in summarizing earnings calls, arranging topics and sentiment, and providing direct quotes.
SPGI’s current ratio (a measure of liquidity) at the end of second-quarter 2024 was 1.03, which was higher than the previous quarter’s 0.92 and the year-ago quarter’s 0.78. A current ratio of more than 1 often indicates that the company will be easily paying off its short-term obligations.
S&P Global’s endeavors to reward its shareholders through share repurchases and dividend payments are impressive. In 2023, S&P Global paid $1.1 billion as dividends and $3.3 billion as repurchases. In 2022, it paid $1 billion as dividends and $12 billion as repurchases. In 2021, SPGI returned $743 million to its shareholders in the form of dividend payments. The consistent dividend payments and share repurchases improve the bottom line of the company, thereby boosting investor morale.
Risks Faced by S&P Global
Higher compensation costs driven by investments in growth initiatives, completion of acquisitions and higher incentive costs are increasing SPGI’s annual expenses. In 2023, total expenses increased 3.4% year over year, which is expected to rise 1.5% in 2024, 5.1% in 2025 and 3.2% in 2026. The gradual increase in expenses is anticipated to put the bottom line under pressure going forward.
The market for credit ratings, financial research, investment advisory services, market data, index-based products and commodities price assessments is highly competitive. SPGI's four reportable segments, Ratings, Market Intelligence, Platts and Indices, compete at the global forefront. Industry giants, Moody's Corp. and Fitch Ratings, through its actions of benefiting the investors, may hurt S&P Global’s market share and weigh upon the top line and strain margins.
Zacks Rank & Stocks to Consider
SPGI carries a Zacks Rank #3 (Hold) at present.
Some better-ranked stocks from the broader Zacks Business Services sector are Barrett Business Services BBSI and Genpact G, each carring a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Barrett Business Services has a long-term earnings growth expectation of 15%. BBSI delivered a trailing four-quarter earnings surprise of 31.9%, on average.
Genpact has a long-term earnings growth expectation of 8.4%. G delivered a trailing four-quarter earnings surprise of 6.9%, on average.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How To Profit From Trillions On Spending For Infrastructure >>Genpact Limited (G) : Free Stock Analysis Report
Barrett Business Services, Inc. (BBSI) : Free Stock Analysis Report
S&P Global Inc. (SPGI) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
