S&P Global, from Ratings to Data

Understand S&P Global's business model and growth potential

In today’s financial world, the importance of reliable data and analytics cannot be overstated. S&P Global, originally known for its credit ratings, has evolved into a leading global provider of financial information, analytics, and intelligence. With a suite of services that extend beyond ratings to encompass data, indices, and research across markets, S&P Global is no longer just a ratings agency, it is a critical partner in investment decision-making and risk management.

This transformation not only highlights the company's adaptability but also reveals its growth potential as demand for real-time financial insights continues to rise. In this article, we will explore S&P Global's business model, its strategic expansion into data and analytics. We will also examine the risks and opportunities, key performance metrics, valuation, and potential returns shareholders can anticipate from investing in S&P Global.

Company overview

The company is divided into 5 divisions:

• S&P Global Intelligence - provides information services and solutions to global markets

• S&P Global Ratings - provides credit ratings, research, and insights

• S&P Global Commodity Insights - provides benchmarks and unparalleled data and insights for global commodity and energy markets

• S&P Global Mobility - provides solutions serving the full automotive value chain, including vehicle manufacturers (OEMs), automotive suppliers, mobility service providers, retailers, consumers, and finance and insurance companies

• S&P Dow Jones Indices - provides index solutions across geographies and asset classes

With 60% of revenue generated in the U.S. and 40% internationally, the company benefits from diverse markets. Its multiple revenue streams are notably strong, with 80% being recurring, highlighting the stability and visibility of its business model.

Market intelligence

This primary division is structured into four core areas:

• Data and advisory solutions (32% of revenue). Encompasses a comprehensive range of research, reference data, market data, derived analytics, and valuation services, covering public and private capital markets.

• Desktop (25% of revenue). Offers data, analytics, and third-party research to support decision-making and streamline workflows, with seamless integration across mobile and Microsoft Office products.

• Enterprise solutions (25% of revenue). Provides software, workflow tools, and managed services to help clients manage and analyze data, assess risk, control costs, comply with regulations, and enhance operational efficiency.

• Credit & risk solutions (18% of revenue). Addresses multi-dimensional risk management across credit, market, and operational domains.

With 96% of this division’s revenue being recurring, it highlights the stability and demand for these services.

Ratings

This division is segmented into five areas: Corporates (50% of revenue), Financials (16%), CRISIL (15%, India’s leader in ratings, data, and analytics), Structured finance (12%), and Governments (7%). As part of its diversified offerings, the division also provides unique services, like stability assessments for stablecoins within the cryptocurrency space.

Commodity Insights

The Commodity Insights division is divided into four segments:

• Energy & resources data insights (34% of revenue)

• Price assessments (33%)

• Upstream data & insights (21%)

• Advisory & transactional services (12%)

With the global energy transition reshaping markets, this division assists clients in navigating complex dynamics in supply, demand, and policy changes across multiple commodity markets. Key activities include Platts’ daily price assessments for commodities such as battery metals, hydrogen, carbon, and biofuels, positioning it as an essential source of market intelligence.

Mobility

This division generates revenue from Dealers (60%), Manufacturing (23%), and Financial & other services (17%). It provides insights to help customers anticipate market shifts, enhance business efficiency, reach target audiences, and drive mobility’s future. Key growth drivers here include electrification, evolving retail trends, supply chain disruptions, and technological innovation.

Dow Jones Indices

Dominated by ETFs & mutual funds (61% of revenue), this division also includes Data subscriptions & custom indices (20%) and Exchange-traded derivatives (19%). Major indices like the S&P 500 and Dow Jones fall within this segment, alongside mid- and small-cap indices (S&P 400 and S&P 600). Growth is driven by the increasing shift from passive to active management in the stock market, with the global ETF AUM expected to grow at a 13.5% CAGR by 2028.

Growth drivers

The company leverages multiple strategies to boost its EPS:

• Synergies from mergers. Expanding cross-selling opportunities, developing new products, and reducing operational costs.

• Business optimization. Streamlining the product portfolio, enhancing synergies, and divesting less strategic activities.

• Technological innovation. Investing in advanced technology, such as AI, to drive competitive edge.

• Expansion into growth markets. Targeting areas like sustainability, private markets, and energy transition to fuel future growth.

Synergies

The company's synergy management has proven highly effective, with cost synergies reaching $619 million in 2023 and revenue synergies of $150 million, expected to grow to $350 million by 2026. This efficiency showcases the company’s capability to integrate new acquisitions through M&A.

Technology

The company places a strong emphasis on technology, targeting areas such as cybersecurity, risk management, cloud computing, AI, data analytics, and IT product development. These advancements are designed to enhance customer experience, create new revenue streams, and strengthen the company's competitive advantages.

For example, in 2024, the company launched ChatAI, a generative AI feature that enables customers to query datasets using natural language. Additionally, ongoing investment in the S&P AI benchmark bolsters its evaluation solutions. To drive its technological transformation further, the company strategically invests in early-stage tech firms, building a pipeline for future innovations.

Growth market

The company has identified three key growth areas: Private Markets, Energy Transition, and Sustainability.

• Private Markets. As private markets continue to expand, reaching $14 trillion in 2023, the company provides essential services like ratings, investment sourcing, portfolio management, data aggregation, valuation, and reporting.

• Sustainability. The company empowers businesses with data to support risk management and ESG initiatives. Its offerings include the S&P Corporate Sustainability Assessment, ESG scores, and metrics for climate and nature-related risks.

ESG scores are calculated from 1,000 data points

Acquistions

Acquisitions are a key growth driver for boosting the company’s organic expansion. The most significant recent acquisition was IHS Markit for $44 billion in 2021, but the company consistently enhances its portfolio by acquiring several companies each year.

Financial targets

Before diving into the financial targets, stock metrics, SWOT analysis, fair valuation, and potential TSR calculations, subscribe now to gain full access to this section. Unlock exclusive content, including in-depth stock analyses, screening tools, industry reports, and valuable portfolio insights!