Standards & Poor Global Inc. (NYSE: SPGI) today reported a 13% increase in net income in the second quarter. The figure beats analyst estimates thanks to new acceleration in the bonds market.
S&P Global’s adjusted net income stood at $385million in Q2, beating estimates by $33million. Revenues grew by 10% to $1.48bn, in respect to the same period last year.
The company is the owner of the largest credit rater – S&P Global Ratings. However, income from credit ratings suffered in the first quarter as raising volatility in financial markets inclined borrowers to delay debt rises which prompted lower demand for new ratings.
In the second quarter uncertainty in the markets seemed to ease as bond issuance increased 18% prompting a 4% increase in revenues for the S&P Global Ratings, to $682 million, comprising the largest share of S&P Global Inc.’s income.
Transaction revenues this quarter grew by as much as 5% to $343 million. Non-transactional revenue was up 3%, to $339million, thanks to growth in surveillance, CRIDIL, commercial paper activity as well as royalties from Risk Services.
Out of other sectors in the S&P business, Global Market Intelligence performed best, with revenues increasing 29% to $416 million in Q2, compared to the same period last year. The company reported that operating profits in this sector grew as much as 48% to $93 million thanks to SNL acquisition, organic growth, and progress on integration-related synergies.
Adjusted diluted earnings per shares increased to $1.44, up 17% compared to the second quarter in 2015.
The company has also made progress in reducing costs. Adjusted Expenses decreased by 5% over partly due to reduced outside services.
President and CEO of S&P Global, Douglas L. Peterson stated:
“We are pleased that every business segment delivered revenue growth despite macroeconomic pressures including low commodity prices and ongoing volatility in the markets we serve. Increasingly, market participants look to S&P Global for the benchmarks and essential intelligence needed to conduct business.”
He continued:
“In addition to our progress on creating revenue growth, we continue to make progress on our productivity initiatives and SNL integration synergies. Overall, our performance enables the Company to continue investing in our portfolio of great assets to improve our customer experience while simultaneously delivering excellent financial results.”
Forecasting developments for the two quarters to come, S&P Global reflected on the still pending sale of J.D. Power. The company stated that it “expects to rellie on stepped up repurchases of shares to minimize dilution from the sale.” Revenue growth has been forecast at mid-single-digit as it will no longer include income from J.D. Power.
The company has however adjusted its guidance on adjusted diluted EPS upwards by $0.05. It expects figures at the end of the year to range between $5.05 and $5.20.
The share price of S&P Global Inc. (NYSE: SPGI) dropped sharply early on in the year as fear that growing volatility in the financial markets would affect revenues. January saw a drop in share prices of as much as 19.23% to a low of 80.77 in early February.
It began to recover after mid-February but saw another slump due to the Brexit vote losing 10% over the three-day period after the vote, to stand at 99.38.
Since then the share price has recovered and the positive earnings report has seen share prices jump 3.44% to a high of $121.5 in early market trading.
At 4.23pm S&P Global Inc. (NYSE: SPGI) shares were trading at $121.34 (+3.34%).
