Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
Non-ratings businesses, including indices, drove S&P Global’s better-than-expected third-quarter results and higher full-year guidance, but ratings growth was weak and full-year revenue guidance remains below the previous market consensus.
Where did third-quarter results outperform?
S&P Global’s third-quarter revenue was 3.678 billion dollars, up 6.8% year over year, above Goldman Sachs’ forecast of 5.6% and the FactSet market consensus of 5.8%. Growth in the energy, indices and market intelligence businesses exceeded Goldman Sachs’ forecasts, while ratings growth was slightly below its forecast.
Operating margin rose 0.6 percentage points year over year to 53.5%, above the market consensus of 52.6%; Goldman Sachs attributed the improvement to a higher share of high-margin revenue and operating leverage. Earnings per share were 4.58 dollars, also above the market consensus of 4.43 dollars.
Goldman Sachs expects investors to react positively to the results: revenue and margin both exceeded expectations.
Why did more growth come from outside the ratings business?
Non-ratings businesses together accounted for approximately 65% of total revenue and grew 9% year over year in the third quarter. The indices business grew 19.9%, above Goldman Sachs’ forecast of 17%; market intelligence and energy grew 6.8% and 5.9%, respectively, also exceeding the bank’s forecasts.
Ratings revenue grew 2.5% year over year, below Goldman Sachs’ forecast of 3.3%. Global rated bond issuance grew 4%, but transaction revenue in the business rose only 1%: transactions involving large cloud service providers and mergers and acquisitions supported investment-grade bonds, offsetting weakness in high-yield bonds, bank loans and structured finance; non-transaction revenue grew 4%.
Why could higher full-year guidance still lower the revenue consensus?
The company raised its 2026 organic and constant-currency revenue growth guidance from 6%–8% to 7.5%–8.5%. Among its main divisions, indices guidance rose from 12%–14% to 17%–18.5%, and ratings guidance rose from 5%–8% to 6.5%–8%. Guidance for market intelligence and energy was unchanged.
On a reported revenue basis, full-year growth guidance rose from 5.9%–7.9% to 7.4%–8.4%; however, the previous FactSet market consensus was 9.1%. Goldman Sachs therefore expects the revenue consensus to be revised down, the operating margin consensus to be revised up and the earnings-per-share consensus to remain broadly stable.
The company raised its full-year operating margin expansion guidance from 35–60 basis points to 75–100 basis points, and increased its earnings-per-share guidance from 17.50–17.75 dollars to 17.70–17.95 dollars.
How does Goldman Sachs view valuation and future drivers?
Goldman Sachs has a buy rating and a 12-month price target of 519 dollars, calculated using its forecast earnings per share of 22.09 dollars and a price-to-earnings multiple of 23.5. The target multiple is above the 16.5 median for information services peers, based on factors including the company’s execution track record, competitive barriers created by proprietary and critical data, and a higher EBITDA margin.
Goldman Sachs is watching management’s assessment of bond issuance growth for the remainder of 2026 and for 2027, as well as the competitive and sales environment, business mix and monetization of AI capabilities in market intelligence. Slower bond issuance growth, budget and staffing pressures among financial services clients, and a market correction could affect growth in the ratings, market intelligence and indices businesses, respectively.
