S&P Global Could Face Headwinds From Fed Rate Uncertainty; Argus Maintains At Buy

Argus said S&P Global Inc (NYSE: SPGI) could face headwinds from the timing and magnitude of upcoming Fed rate hikes, as well as rising default risk in the corporate bond market. However, the brokerage maintains its Buy rating, saying that the company will be able to navigate through the challenge.

"S&P Global has completed a multiyear restructuring and is now focused on its faster-growing financial businesses, including the lucrative and not-very-competitive business of rating bonds. The company has a transparent management team and consistently 'underpromises and overdelivers' with financial results," analyst John Eade wrote in a note.

Despite the recent $1.5 billion settlement with the Department of Justice and other parties straining the balance sheet, the analyst expects strong cash flows to repair the damage over the coming quarters.

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Eade raised his 2016 EPS estimate to $5.19 from $5.13, based on the renewed growth in the Global Ratings group, and upped his 2017 estimate to $5.82 from $5.75.

"Looking ahead, we think that top-line demand will continue to grow in the coming quarters as comparisons become easier. Management has a long history of increasing margins over time in this group, and we look for operating profit growth of 7–8 percent over the next few quarters," Eade highlighted.

Eade has raised his price target to $135 from $120. S&P Global shares have outperformed over the past quarter, with a gain of 13.4 percent, compared to a 6 percent rise for the S&P 500.

At time of writing, shares of S&P Global were almost flat on the day at $119.63.