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On Wednesday, Goldman Sachs increased its price target on S&P Global (NYSE: SPGI) shares to $561 from the previous $498, while maintaining a Buy rating on the stock, citing strong second-quarter results that surpassed both their own estimates and the consensus.
S&P Global's revenue, EBITDA margins, and earnings per share (EPS) were all highlighted as exceeding expectations by Goldman, leading to an upward revision of the full-year guidance.
The company's Ratings business was particularly noted for driving this positive revision cycle, benefiting from high debt issuance volumes fueled by refinancing in high-yield and leveraged loans, as well as a surge in issuance activity.
Management has significantly upgraded its full-year 2024 outlook for rated debt issuance, jumping from a 6-10% increase to approximately 25%. This adjustment is expected to result in mid-teens growth in Ratings revenue, up from previous high-single-digit projections, noted a Goldman Sachs analyst.
Goldman Sachs analyst believe there is additional potential for S&P Global's Ratings revenue guidance to rise, influenced by anticipated rate cuts and an increase in mergers and acquisitions (M&A) activity. Furthermore, S&P Global's non-ratings divisions are collectively continuing to achieve robust high-single-digit revenue growth. This is led by the Indices and Commodity Insights segments, which are experiencing double-digit growth.
The firm's optimistic view extends to several factors that are likely to contribute to the growth of S&P Global's shares. These include an improving cyclical outlook for Market Intelligence, increased assets under management (AUM) from fund inflows into S&P-linked indices, the ongoing realization of merger revenue synergies, and benefits accruing from the company's Gen AI initiative.
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