Morningstar | S&P's Subscription Businesses Shine Amid Drop in Ratings
Wide-moat-rated S&P Global reported a decent first quarter despite a material decline in global debt issuance during the period. Earnings per share decreased 14% year over year due to a pension charge and expenses associated with the Kensho acquisition. Excluding these items, earnings per share grew 5% year over year,  which we see as reasonable growth in a challenging operating environment. We will maintain our $224 fair value estimate.There was essentially no revenue growth this quarter, as the 7% decline in ratings-related revenue was offset by growth in subscription revenue from the company's Market Intelligence platform, Platts Analytics, and index products. We anticipate that subscription revenue from the Market Intelligence and Platts Analytics platforms will be major contributors to revenue growth over the next five years and will allow the company to expand its operating margin.
Expenses grew 1% year over year as the company invested in its growing segments and had essentially flat expenses in the ratings business. We think this is reasonable because the headwinds in ratings are from cyclical rather than structural factors.
The company launched ESG indexes this quarter and anticipates a greater emphasis on sustainability across its product lines. Given that there are several index providers already serving this space, we think S&P Global will need to clearly differentiate its sustainable product offering from the herd.
S&P Global is a provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. The company's segments include: S&P Global Ratings, which provides credit ratings, research and analytics; S&P Global Market Intelligence, which provides multi-asset-class data, research and analytical capabilities that integrate cross-asset analytics and desktop services; S&P Global Platts, which provides information and benchmark prices for the commodity and energy markets; and S&P Dow Jones Indices, which provides a variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
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