EUR 850.00 For Business Accounts Only

Morningstar | S&P Global, More than Just Bond Ratings

We expect S&P Global to continue to reap the benefits of its leading position in credit ratings and equity data. The company's strategy of investing early to become a standard bearer for ratings and data, built on a foundation of valuable brands and proprietary data sets, has been a big driver of its success. Though some might be tempted to believe that the 2008-09 global financial crisis weakened the major bond ratings agencies, making them vulnerable to competition, it actually raised the barriers to entry and success. Prior to 2008, S&P spent approximately $35 million on compliance costs each year. Today, that number exceeds $100 million, representing a significant fixed investment that new entrants must overcome. Bond investors also continue to require an S&P or Moody's seal of approval on any new issuance, making them a standard bearer for investors. In our opinion, S&P's patient investment in its other businesses will only add to its wide economic moat. After shedding its education business in 2013, the company has been focused on its core credit ratings (51% of 2018 segment operating income), market data and Platts (31%), and indexes (19%) operations. With investors tending to focus on bond issuance and demand for credit when looking at S&P, we believe the company's Platts and market intelligence segments are underrated and will contribute to higher margins in the future. We believe the business of providing the data that underpins futures and exchange contracts and investment processes will become increasingly lucrative, especially as the company reaps the benefits of past investments.Lower U.S. corporate taxes are weighing on global issuance. While decreased debt issuance will represent a headwind for S&P, the level of global corporate high-yield debt maturation will increase from around $200 billion in 2018 to $700 billion in 2022, spurring an increase in refinancing activity. As economic growth plays a big role in demand for debt, we don't anticipate any significant disruptions. That said, any slowdown in credit issuance will likely be offset in part by price increases--an area where S&P still has considerable bargaining power.