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S&P Global (SPGI) Q3 Earnings Beat Estimates, Revenue Miss

S&P Global Inc.SPGI reported mixed third-quarter 2018 results wherein the company's earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

Adjusted earnings per share of $2.11 beat the Zacks Consensus Estimate by 10 cents and increased 23.4% on year-over-year basis. The bottom Line benefited from revenue growth, operating leverage, and tax reform.

Revenues of $1.54 billion lagged the consensus mark by $37 million but increased 2.2% year over year. The top line benefited from growth across Market Intelligence, Platts and S&P Dow Jones Indices segments.

So far this year, shares of S&P Global have gained 5% compared with 5.7% rise of the industry it belongs to.

Segmental Revenues

Ratings revenues decreased 5% year over year to $700 million. Transaction revenues declined 12% to $328 million due to debt issuance reductions and lower bank loan ratings activity. Non-transaction revenues increased 1% to $372 million owing to growth in fees associated with surveillance and inter-segment royalties, which was partially offset by lower Rating Evaluation Service activity.

Revenues from the United Statesdecreased 6%. The same decreased 4% internationally due to a decline in Asia Pacific, Latin America and Canada, which was partially offset by growth in EMEA. Despite the decline, the international segment contributed 43% to total revenues.

Market Intelligence revenues were up 10% year over year to $464 million, primarily driven by growth in Risk Services and Data Management Solutions and mid-single digit organic growth in Desktop.

Platts revenues increased 5% to $204 million owing to growth in the core subscription business, which was partially offset by a decline in Global Trading Services due to reduced trading volumes in certain commodity products.

S&P Dow Jones Indices revenues increased 10% to $205 million driven by an increase in asset-linked fees and revenues associated with data and custom subscriptions. Revenues associated with data and custom subscriptions increased 12% and asset-linked fees grew 11%.

Operating Results

Adjusted operating profit increased 11% year-over-year to $767 million. Adjusted operating profit margin increased 380 basis points (bps) to 50%.

Going by segments, Ratings adjusted operating profit increased 1% to $396 million and the adjusted operating profit margin improved 370 bps to 57%.

S&P Dow Jones adjusted operating profit increased 13% to $136 million and adjusted operating profit margin improved 190 bps to 66%.

For Market Intelligence, adjusted operating profit increased 20% to $168 million. Adjusted operating profit margin improved 300 bps to 36%.

Platts' adjusted operating profit increased 15% to $102 million and adjusted operating profit margin improved 440 basis points to 50%.

S&P Global Inc. Price, Consensus and EPS Surprise

S&P Global Inc. Price, Consensus and EPS Surprise | S&P Global Inc. Quote

Balance Sheet and Cash Flow

S&P Global exited the third-quarter 2018 with cash, cash equivalents, and restricted cash of $2.20 billion compared with $1.94 billion at the end of the prior quarter. Long-term debt of $3.66 billion was flat with the prior quarter.

The company generated $498 million of cash from operating activities in the reported quarter. Free cash flow was $432 million. Capital expenditures came in at $28 million.

During the reported quarter, the company returned $126 million to shareholders through dividend payment and completed the $1 billion accelerated share repurchase (ASR) agreement (which was started in the first quarter). The company is hopeful of starting a new $500 million ASR, which is expected to continue till Feb 2019.

2018 Guidance

S&P Global tightened its adjusted earnings per share (EPS) guidance for full-year 2018. The company now expects adjusted earnings in the range of $8.50-$8.60 per share compared with $8.45-$8.60 guided earlier. The Zacks Consensus Estimate of $8.48 is below the midpoint of the currently guided range.

Zacks Rank & Upcoming Releases

Currently, S&P Global carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Investors interested in the broader Business Services sector are keenly awaiting earnings reports of key players like Booz Allen Hamilton Holding BAH , Waste Connections WCN and First Data FDC . Booz Allen Hamilton will report second-quarter fiscal 2019 results on Oct 29. Waste Connections and First Data will release third-quarter 2018 results on the same day.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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