S&P Global Inc (NYSE:) saw its stock price surge nearly 3% on Tuesday following its first quarter earnings release.
There were a couple of key catalysts for S&P Global, the parent company for the S&P 500 among other properties. One was its strong earnings, which crushed analysts’ estimates. The second was its announcement that it was spinning off of its S&P Mobility Division into a separate, stand-alone public company.
On the earnings front, S&P Global posted revenue of $3.8 billion in the first quarter, which is an increase of 8% compared to the first quarter of 2024. This was ahead of estimates of $3.7 billion.
Net income rose 10% to $1.1 billion, while earnings jumped 12% to $3.54 per share. Adjusted net income for Q1 increased 7% to $1.34 billion while adjusted earnings surged 9% to $4.37. That far exceeded estimates of $4.13 earnings per share (EPS).
“In periods of volatility and uncertainty, our customers rely on us for much-needed data and insights. Our shareholders also rely on us to be good stewards of capital,” S&P Global President and CEO Martina Cheung said.
A Wide Moat Protects S&P Global
One of the great things about S&P Global stock is the wide moat around its key businesses. Another great thing about it is its diversity of revenue streams. These two factors make it one of the best all-weather stocks you can buy.
As such, it tends to do well in all different market types, including this one, as it is only down about 1% year-to-date. Over the past 10 years, it has posted an average annualized return of 16.6%. S&P Global is also has a reliable dividend, which it has increased for 52 straight years, making it a dividend king. When you include the reinvested dividend, S&P Global stock has returned 17.5% per year, on average.
These strengths were on full display in Q1, as the moats around its credit ratings and indexing businesses allowed them to flourish.
S&P Global is one of just three major credit rating agencies, and really two of them, Moody’s and S&P Global, are the dominant players, splitting about 80% of the market share. The ratings business generated $1.15 billion in revenue in the quarter, up 8%.
The indexing business, which includes the S&P 500 among many others, saw revenue climb 15% to $445 million.
The other strength is its diversity of revenue. In addition to these two businesses, it also has a Market Intelligence arm, which provides data and analytics to institutional investors. It is one of the leaders in this space, as well. In Q1, Market Intelligence saw revenue increase 5% to $1.2 billion. Further, S&P has a Commodity Insights group, as well as the aforementioned Mobility division.
Spinning off Mobility
The Mobility Division provides data, analytics, and technology solutions specifically for the automobile industry. This unit had a solid quarter as well, generating $420 million in revenue, an 8% year-over-year increase.
On Tuesday, the company announced that it is spinning off this successful and growing business into a separate, standalone company. The move will allow S&P Global to consolidate its resources around its four main businesses – Market Intelligence, Indexes, Commodity Insights, and Credit Ratings.
It will also enable the Mobility business to accelerate its growth as a standalone business. The company expects to complete the separation in 12 to 18 months. It will provide more information on its strategy at its Investor Day, scheduled for November 13.
Investors reacted favorably to the earnings, the spinoff, and its outlook, which calls for 4% to 6% revenue growth in 2025. The company is also targeting a high operating margin of 42.5% to 43.5%, and earnings of $14.60 to $15.10 per share.
S&P Global is a great stock for all the reasons outlined above. It has been an earnings powerhouse over the years, as its businesses offset one another nicely. The P/E is high at 38, but it is down from 50 a year ago. The stock is typically a good long-term buy, particularly if you can get in in a dip.