Business Overview and History
S&P Global Inc. (SPGI) is a leading provider of credit ratings, benchmarks, analytics, and workflow solutions across the global capital, commodity, and automotive markets. With a heritage dating back over 150 years, the company has established itself as an indispensable partner to its diversified customer base, leveraging its unparalleled data assets, technological capabilities, and deep industry expertise.
S&P Global's origins can be traced back to 1860, when Henry Varnum Poor published the first edition of the History of the Railroads and Canals of the United States, a seminal work that laid the foundation for the company's credit ratings business. In 1916, the company merged with Standard Statistics Bureau, forming Standard Statistics Company, which later became S&P in 1941. The company's growth accelerated through a series of strategic acquisitions, including Platts (2001), McGraw-Hill Financial (2013), and IHS Markit (2022), solidifying its position as a global leader in its core markets.
S&P Global was originally incorporated in December 1925 under the laws of the state of New York. In the 1970s, the company expanded internationally, opening offices in over 25 countries around the world, which has been a key driver of the company's growth over the years. The company faced challenges in the early 2000s amidst regulatory scrutiny of credit rating agencies in the aftermath of high-profile corporate scandals. However, the company successfully navigated these issues and continued to grow its core credit ratings business.
In 2012, S&P Global formed a joint venture called S&P Dow Jones Indices, which has become a global leader in providing index-based products. This strategic move significantly diversified the company's revenue streams beyond just credit ratings. The 2022 merger with IHS Markit was transformative, expanding the company's capabilities in areas like data analytics, commodity insights, and automotive solutions.
Today, S&P Global operates five main business segments: Market Intelligence, Ratings, Commodity Insights, Mobility, and Indices. Market Intelligence provides multi-asset-class data and analytics, serving trading and investment professionals, government agencies, and corporations. Ratings is an independent provider of credit ratings, research, and analytics, offering investors and other market participants information, ratings, and benchmarks. Commodity Insights is a leading independent provider of information and benchmark prices for the commodity and energy markets. Mobility is a leading provider of solutions serving the full automotive value chain, from manufacturers to consumers. Indices is a global index provider maintaining a wide variety of valuation and index benchmarks for investment advisors, wealth managers, and institutional investors.
Financials
S&P Global has consistently delivered strong financial results, underpinned by its diversified business model and disciplined execution. In the latest fiscal year (2024), the company reported revenue of $14.21 billion, a 14% increase from the prior year. Net income for the same period stood at $3.85 billion, translating to diluted earnings per share of $12.35. The company generated operating cash flow of $5.69 billion and free cash flow of $5.28 billion in 2024.
For the most recent quarter ended December 31, 2024, S&P Global reported revenue of $3.59 billion and net income of $880 million.
Geographically, in 2024 S&P Global generated 61% of its revenue from the U.S. and 39% from international markets, with the European region contributing 23%, Asia 10%, and the rest of the world 6%.
The company's financial ratios paint a picture of a well-capitalized and efficiently run organization. As of the end of 2024, S&P Global's debt-to-equity ratio was 0.35, indicating a prudent capital structure. Furthermore, the company's return on equity (ROE) of 11.30% demonstrates its ability to generate strong returns for its shareholders.
Liquidity
S&P Global maintains a strong liquidity position, ensuring its ability to meet short-term obligations and fund ongoing operations. The company's current ratio and quick ratio, measures of short-term liquidity, both stood at 0.85 as of the end of 2024, suggesting a healthy ability to meet its short-term obligations.
As of December 31, 2024, S&P Global had $1.67 billion in cash and cash equivalents on its balance sheet. The company also has a $2 billion revolving credit facility, which was undrawn as of the end of 2024, providing additional financial flexibility.
Operational Highlights and Strategic Initiatives
Throughout its history, S&P Global has been at the forefront of innovation, constantly adapting to evolving market dynamics and customer needs. The company's strategic focus on enhancing its technological capabilities, expanding its product offerings, and deepening customer relationships has been a key driver of its success.
One notable example of S&P Global's innovative prowess is its embrace of generative artificial intelligence (AI) across the organization. The company has developed internal tools, such as the "S&P Spark Assist," which has enabled over 1,300 use cases for increased productivity and efficiency. Additionally, the company has introduced customer-facing solutions, like the "Kensho-LLM-ready API," which allows clients to seamlessly integrate S&P Global's data into their own AI workflows.
S&P Global has also been at the forefront of the energy transition and sustainability. In 2024, the company's energy transition and sustainability-focused offerings generated $104 million in revenue, a 23% year-over-year increase. This underscores the company's ability to capitalize on evolving market trends and provide valuable insights and solutions to its customers.
Another strategic focus for S&P Global has been strengthening its customer relationships. Under the leadership of CEO Martina Cheung, the company has established a Chief Client Office to deepen engagement with its most important stakeholders. This initiative has already yielded positive results, with the company meeting with 85% of its largest strategic customers in the past 100 days.
Risks and Challenges
While S&P Global has demonstrated remarkable resilience and adaptability, the company is not immune to various risks and challenges that could impact its future performance.
One key risk is the highly competitive nature of the markets in which S&P Global operates. The company faces fierce competition from both traditional and non-traditional providers, including asset managers, investment banks, and technology-driven companies. Maintaining its competitive edge through continuous innovation and a laser-focus on customer value will be crucial.
Additionally, the company is subject to a complex and evolving regulatory landscape, both in the U.S. and internationally. Changes in laws and regulations, such as those governing credit rating agencies, benchmarks, and data privacy, could increase the company's compliance costs and exposure to legal and reputational risks.
Cybersecurity threats also pose a significant risk to S&P Global's operations, given the sensitive nature of the data and information it handles. The company's ability to safeguard its systems and protect its clients' confidential data is paramount to maintaining trust and market leadership.
Finally, macroeconomic and geopolitical factors, such as fluctuations in interest rates, commodity prices, and trade policies, can impact the demand for S&P Global's products and services, particularly in its market-driven business segments like Ratings and Indices.
Outlook and Guidance
Looking ahead, S&P Global has provided guidance for the 2025 fiscal year that reflects its commitment to sustained growth and profitability. The company expects revenue to increase between 5% and 7%, with adjusted operating margins in the range of 49% to 50%. This guidance implies continued momentum across the company's diversified business segments, supported by its innovative product pipeline and disciplined cost management.
In the Ratings segment, S&P Global anticipates modest growth of 3% to 5% in 2025, as billed issuance volumes and modest price increases are expected to be partially offset by an unfavorable mix of issuance. The company's Market Intelligence segment is projected to grow between 5% and 6.5%, with the subscription business poised to benefit from improved retention rates and the lapping of earlier-year cancellations.
The Commodity Insights and Mobility segments are both expected to deliver strong revenue growth of 7% to 8.5%, driven by continued demand for energy transition solutions and insurance-related products, respectively. The Indices segment is forecasted to grow between 8% and 10%, as the company continues to invest in expanding its product suite and enhancing its technological capabilities.
S&P Global's adjusted diluted EPS guidance for 2025 is in the range of $17 to $17.25, representing double-digit growth at the high end. The company expects adjusted free cash flow to be around $6 billion, with a target of returning 85% or more to shareholders.
It's worth noting that S&P Global exceeded the midpoint of their initial EPS guidance range by more than 13% in 2024, delivering 25% growth in adjusted EPS. This track record of outperformance gives credence to the company's 2025 projections.
Industry Trends
The global financial information and analytics industry in which S&P Global operates has seen steady growth, with a compound annual growth rate (CAGR) of approximately 5-7% over the past 5 years. Key trends shaping the industry include increasing demand for data-driven insights, growth in passive investing and indexing, and acceleration of the energy transition. These trends align well with S&P Global's strategic focus areas and diverse portfolio of products and services.
Conclusion
S&P Global's rich history, diversified business model, and relentless focus on innovation have positioned the company as an indispensable partner to its global customer base. By leveraging its unparalleled data assets, deep industry expertise, and technological prowess, the company has consistently delivered strong financial performance and shareholder value.
As it navigates the evolving landscape of the capital, commodity, and automotive markets, S&P Global remains steadfast in its commitment to disciplined execution, strategic investments, and customer-centric innovation. With a robust product pipeline, a strengthened leadership team, and a clear vision for the future, the company is well-equipped to continue powering ahead and creating long-term value for its stakeholders.
The company's strong financial performance, solid liquidity position, and favorable industry trends provide a strong foundation for future growth. As S&P Global continues to innovate and expand its offerings across its five main business segments, it is well-positioned to capitalize on the increasing demand for data-driven insights and analytics in the global financial markets.