S&P Global: A Hidden Gem in Financial Data and Analytics

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3 週間前

Key Highlights

S&P Global, a 165-year-old financial data leader, is poised for significant margin expansion through an upcoming spinoff and aggressive AI integration.
The company’s operating margins, historically high at 50.9%, are projected to rebound as it focuses on its core financial services business.
S&P Global's innovative use of AI, particularly through its Kensho division, is enhancing operational efficiency and creating industry-standard metrics.
With a planned spinoff of its Mobility division, S&P Global aims to unlock substantial shareholder value and streamline operations.
The company has a history of consistent dividend increases, making it an attractive option for growth and income investors.

Introduction

While the financial markets are abuzz with the latest trends in artificial intelligence and tech startups, a quiet transformation is taking place within a stalwart of the financial services industry: S&P Global Inc. With a rich history dating back 165 years, this giant operates in almost every facet of the global financial system, yet it remains under the radar for many investors. Surprisingly, S&P Global's strategic initiatives, particularly in AI and its planned business spinoff, are setting the stage for remarkable growth that could yield double-digit returns over the next decade.

This article delves into S&P Global's current positioning, the implications of its spinoff, the AI enhancements driving productivity, and the compelling financial metrics that suggest this company is an investment opportunity worth watching.

The Company Nobody's Talking About

S&P Global operates through four primary divisions: Ratings, Market Intelligence, Indices, and Platts, with a fifth division, Mobility, scheduled for spinoff in 2026. The Ratings division provides vital credit ratings on approximately $17 trillion in debt, underscoring the company's critical role in the global economy.

In 2021, before acquiring IHS Markit, S&P Global achieved a remarkable GAAP operating margin of 50.9%, a figure that rivals that of many tech companies. However, the integration of IHS Markit has temporarily reduced margins, projected to be around 43% by 2025. This decline is merely a reflection of the company's ongoing adjustment period, as management has a clear strategy to restore its historic profitability levels.

The AI Revolution Wall Street Isn't Watching

While much of the market's focus remains on consumer-facing AI applications like chatbots, S&P Global is leveraging AI to enhance its financial data services. The company’s Kensho division, acquired for $550 million in 2018, is at the forefront of these efforts. Kensho's AI-driven tools are designed to improve efficiency and productivity across S&P Global's operations, including the development of AI benchmarks to evaluate large language models tailored for business and finance.

These "S&P AI Benchmarks by Kensho" have started gaining traction as standardized metrics for comparing AI systems, with major corporations like Accenture partnering with S&P Global to utilize these benchmarks. This adoption not only strengthens S&P Global's competitive position but also offers potential network effects as more businesses integrate these standards into their operations.

Internally, S&P Global employs AI tools like Spark Assist and ChatIQ, which enhance workflow efficiency for employees. Although specific cost savings have not been disclosed publicly, the company’s commitment to AI is evident and aligns with broader trends in the industry.

The Catalyst Everyone's Ignoring

The forthcoming spinoff of S&P Global's Mobility division is more than a corporate restructuring; it is a strategic move to sharpen focus on its core financial data and analytics businesses. The Mobility segment, which includes the well-known Carfax brand, contributes about 11% of the company's revenue, or approximately $1.6 billion projected for 2024.

By eliminating this division, S&P Global aims to streamline operations and enhance its margins. A simplified corporate structure is expected to help the market better recognize the company's true earnings potential. Historically, conglomerates often trade at a discount compared to more focused firms, and shedding the Mobility business is a strategic step toward eliminating that complexity.

Numbers That Demand Attention

Analysts predict that S&P Global's adjusted operating margins could reach as high as 52% by 2029, surpassing even the company's previous peak. The outlook for 2025 is already showing promising signs, with projected revenue growth of 4% to 6%, GAAP earnings per share estimates of $14.60 to $15.10, and adjusted earnings per share of $16.75 to $17.25.

To understand the potential impact of these figures, consider this: if S&P Global maintains a revenue growth rate of 6% annually, sales could reach approximately $27 billion by 2035. If margins return to the historical high of 50.9%, this would translate to an operating income of about $13.7 billion. After accounting for interest and taxes, the earnings per share could realistically soar to between $40 and $45—more than double the current levels.

Applying a conservative valuation multiple of 30 times earnings suggests a stock price range of $1,200 to $1,350, highlighting the significant upside potential for investors.

The Dividend Growth Story

S&P Global is not just a growth play; it is also a consistent dividend payer with 52 consecutive years of dividend increases. Currently, the dividend yield stands at 0.76%. However, the real power lies in the company's historical ability to raise dividends. If S&P Global continues its trend of increasing dividends by a conservative 10% annually, investors could see the annual dividend rise to around $10 per share by 2035.

For those purchasing shares today at approximately $504, this would represent a yield on cost of about 2%, rewarding long-term investors with increasing income regardless of stock price fluctuations.

Why This Incredible Opportunity Exists

S&P Global represents a rare opportunity in today’s market landscape, characterized by a solid business model, clear catalysts for margin expansion, and a management team that has demonstrated its capability to deliver results. As growth investors chase fleeting trends and value investors await deeper discounts, S&P Global offers a unique proposition: a high-quality compounder available at a reasonable price, with multiple avenues for growth.

The upcoming spinoff will act as a catalyst, while the company’s AI-driven transformation promises to enhance margins and operational efficiency. Coupled with a history of reliable dividend growth, S&P Global stands out as a compelling investment choice for those seeking both growth and income.

FAQ

What is S&P Global?

S&P Global Inc. is a financial data and analytics company that operates across various sectors, including credit ratings, market intelligence, and commodity pricing.

Why is S&P Global's upcoming spinoff significant?

The spinoff of its Mobility division is expected to streamline operations, enhance focus on higher-margin financial data services, and unlock significant shareholder value.

How is S&P Global using AI?

S&P Global is integrating AI through its Kensho division, developing benchmarks for AI systems in finance, and utilizing AI tools to improve operational efficiency and customer experiences.

What are the projected earnings for S&P Global?

Analysts estimate that S&P Global's earnings per share could reach between $40 and $45 by 2035, significantly higher than current levels.

Why is investing in S&P Global appealing?

The combination of a proven business model, strong margin expansion potential, consistent dividend growth, and a focus on AI-driven efficiencies makes S&P Global an attractive investment opportunity.

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