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 rich history spanning over a century, the company has evolved from its roots as a credit rating agency to become a diversified financial information and technology powerhouse, catering to the diverse needs of its vast customer base.
Company History and Evolution
Founded in 1860 as the Poor's Publishing Company, S&P Global's origins can be traced back to Henry Varnum Poor's pioneering work in providing financial information to investors. In 1941, the company merged with Standard Statistics Company to form Standard & Poor's Corporation. Over the decades, the company has undergone several transformations, mergers, and acquisitions, including the landmark merger with IHS Markit in 2022, which further strengthened its position as a global leader in data and analytics.
S&P Global's expansion and diversification efforts have been ongoing since its inception. In 1957, the company launched the S&P 500 index, which has become one of the most widely followed stock market indices globally. The acquisition of Commodities Research Bureau in 1962 marked the company's entry into commodity markets, further broadening its scope of services. During the 1990s and 2000s, S&P Global faced significant challenges and scrutiny related to its credit ratings business, particularly during the global financial crisis. The company was accused of conflicts of interest and providing inflated ratings on structured finance products, leading to government investigations, lawsuits, and regulatory reforms that impacted the industry. Despite these challenges, S&P Global persevered and continued to grow its business. A notable milestone in its recent history was the acquisition of SNL Financial in 2016, a leading provider of financial and market intelligence.
Business Segments
Today, S&P Global operates through five reportable segments: S&P Global Market Intelligence, S&P Global Ratings, S&P Global Commodity Insights, S&P Global Mobility, and S&P Dow Jones Indices. These divisions collectively provide a comprehensive suite of products and services that cater to a wide range of industries and market participants, from asset managers and investment banks to commodity producers and automotive manufacturers.
S&P Global Market Intelligence is a global provider of multi-asset-class data and analytics, delivering workflow solutions that empower its customers to make informed decisions. The Ratings segment is an independent provider of credit ratings, research, and analytics, offering investors and other market participants valuable information and benchmarks. S&P Global Commodity Insights is a leading independent provider of information and benchmark prices for the commodity and energy markets, while S&P Global Mobility is a provider of solutions serving the entire automotive value chain. Finally, S&P Dow Jones Indices is a global index provider maintaining a wide variety of valuation and index benchmarks for investment advisors, wealth managers, and institutional investors.
Financials
The company's financial performance has been impressive, with the latest reported annual revenue of $12.5 billion and a net income of $2.63 billion as of December 31, 2023. S&P Global's operating cash flow for the same period stood at $3.71 billion, while its free cash flow reached $3.57 billion, showcasing the company's strong cash generating capabilities.
In the most recent quarter (Q3 2024), S&P Global reported revenue of $3.58 billion, net income of $971 million, operating cash flow of $1.45 billion, and free cash flow of $1.41 billion. The company achieved a remarkable year-over-year revenue growth of 16%, driven by strength across all of its reportable segments.
Breaking down the performance by segment for Q3 2024:
- Market Intelligence revenue increased 6%, primarily due to subscription revenue growth for workflow solutions, data feed products, and Market Intelligence Desktop products. The acquisition of Visible Alpha in May 2024 positively impacted subscription revenue growth, while the sale of Fincentric in August 2024 had an unfavorable impact.
- Ratings revenue surged 36%, with transaction revenue growth of 83%. This increase was primarily driven by growth in corporate bond ratings revenue and bank loan ratings revenue due to increased issuance volumes and higher refinancing activity. Structured finance revenue also increased, driven by higher collateralized loan obligations (CLOs) issuance.
- Commodity Insights revenue grew 9%, mainly due to continued demand for market data and market insights products, as well as an increase in sales & usage-based royalties from licensing proprietary market data to commodity exchanges.
- Mobility revenue increased 9%, primarily due to growth within the Dealer and Financial businesses, driven by continued new business growth and strong underwriting volumes. This was partially offset by a decrease in non-subscription revenue due to lower recall activity in the Manufacturing business.
- Indices revenue rose 18%, primarily due to an increase in asset-linked fees revenue driven by higher levels of assets under management (AUM) for ETFs and mutual funds, higher data subscription revenue, and higher exchange-traded derivative revenue.
In terms of geographic performance, U.S. revenue accounted for 61% of total revenue, while international revenue made up 39%, with the European region contributing 22%, Asia 11%, and the rest of the world 6%.
Liquidity
The company's liquidity position is robust, with a current ratio of 0.95 and a quick ratio of 1.42 as of the end of 2023, indicating its ability to meet short-term obligations. The debt-to-equity ratio of 0.33 suggests a balanced capital structure, providing the company with financial flexibility to pursue growth initiatives and strategic investments. As of December 31, 2023, S&P Global had cash and cash equivalents of $1.29 billion and an undrawn $2.0 billion revolving credit facility, further strengthening its liquidity position.
Strategy and Innovation
S&P Global's strategy of leveraging its diverse portfolio of products and services, along with a focus on innovation and technological advancements, has been a key driver of its success. The company's recent investments in areas such as generative AI and sustainability-related solutions have further strengthened its market position and ability to meet the evolving needs of its customers.
Despite the challenges posed by the COVID-19 pandemic, which affected some of its end-markets, S&P Global has demonstrated its resilience and adaptability. The company has navigated the crisis effectively, implementing cost-saving measures and focusing on digital transformation to enhance its operational efficiency and customer experience.
Future Outlook
Looking ahead, S&P Global's management has provided a positive outlook for the company's future performance. The company has raised its revenue growth guidance for 2024 to a range of 11.5% to 12.5%, up from the previous guidance of 9% to 10%. This is accompanied by a substantial increase in its adjusted margin expansion projection to 200-250 basis points, up from 150-200 basis points previously.
Additionally, S&P Global has raised its adjusted diluted EPS guidance to $15.10 to $15.30, up from $14.40 to $14.55, and increased its adjusted free cash flow guidance to approximately $5.2 billion, up from $4.7 billion.
For individual business segments, the company now expects: - Market Intelligence revenue growth of 6-6.5% (previously 7-8%) - Ratings revenue growth of 26-28% (previously 14-16%) - Commodity Insights revenue growth of 9-9.5% (previously 8-9%) - Mobility revenue growth of 8-8.5% (previously 8-9%) - Indices revenue growth of 13-15% (previously 10-12%)
These upward revisions in guidance reflect the strong performance of S&P Global's market-driven businesses and management's confidence in the company's continued growth trajectory.
The company's strategic initiatives, such as expanding its presence in private markets, enhancing its sustainability and energy transition offerings, and leveraging its enterprise data capabilities, are expected to contribute to its long-term growth and profitability. Additionally, the company's commitment to returning capital to shareholders through share repurchases and a steadily increasing dividend further underscores its confidence in its future prospects.
Conclusion
In conclusion, S&P Global's diversified business model, technological prowess, and strong financial performance position the company well to capitalize on the evolving needs of its global customer base. The company's impressive performance across all its segments, coupled with its raised guidance for 2024, demonstrates its ability to adapt to market conditions and leverage its strengths. As S&P Global continues to innovate and execute on its strategic priorities, it remains poised to deliver sustainable growth and compelling value for its shareholders in the rapidly evolving financial information and technology landscape.