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I last reviewed S&P Global (SPGI) in this April 30, 2025 post at which time the current share price was ~$492 and the most current quarterly financial information was for Q1 2025. My suggestion was that investors acquire shares in great companies during periods of turmoil.
Now that SPGI has released Q2 and FY2025 results on July 31, it is an opportune time to revisit this exiting holding. As I compose this post, SPGI's share price is hovering around ~$546.50.
Business Overview
Learn about SPGI's business and risk factors by reading Part 1 in the FY2024 10-K and the company's website.
OSTTRA Divestiture
CME Group (I wrote about this company in this July 26 post) and SPGI have both signed a definitive agreement to sell OSTTRA, a leading provider of post-trade solutions for the global OTC market, to investment funds managed by KKR, a leading global investment firm. The terms of the deal equals a total enterprise value of $3.1B, subject to customary purchase price adjustments. Proceeds will be divided evenly between SPGI and CME pursuant to their 50/50 joint venture and the transaction is expected to close in the second half of 2025.
SPGI's management expects to use the proceeds from the OSTTRA sale for additional share repurchases.
Intent To Separate Mobility Division
On April 29, SPGI announced its intent to separate S&P Global Mobility (Mobility) from SPGI. The planned separation is expected to result in Mobility becoming a standalone public company.
The separation is expected to be tax-free to shareholders and to be completed within 12 - 18 months.
Financial Results
Q2 and YTD2025
Material related to the Q2 and YTD2025 earnings is accessible here.
Details about each business segment's performance in Q2 2025 relative to Q2 2024 is in the Q2 2025 related material.
Operating Cash Flow (OCF), Free Cash Flow (FCF), and CAPEX
FCF is a non-GAAP metric, and therefore, its method of calculation is inconsistent. Historically, SPGI deducts CAPEX from OCF to calculate its FCF. In prior posts, however, I explain my rationale for also deducting share-based compensation (SBC) from a company's OCF.
SPGI deducts distributions to non-controlling interests in determining its FCF. I neglected to do so in my prior post and now account for this line item.
SPGI also makes various adjustments when calculating its Adjusted/Non-GAAP pro forma adjusted free cash flow excluding certain items. These adjustments typically result in a higher level of FCF. In addition, the nature of the adjustments change and they can be significant which muddies the comparison of YoY results. In FY2022 - FY2024, for example, 'IHS Markit merger costs' and 'Tax on gain from divestitures' were adjustments totaling $1.431B, $0.73B, and $0.406B. YTD2025, there has been no adjustment for 'Tax on gain from divestitures' and only $0.015B in 'IHS Markit merger costs'.
These non-recurring adjustments generally improve SPGI's FCF levels. By excluding them in determining SPGI's FCF, my FCF estimates are more conservative.
The following reflects SPGI's FCF using the conventional and modified calculation methods.
NOTES:
- The FY2019 - FY2024 FCF levels differ slightly from my prior post because I now deduct the distribution to non-controlling shareholders.
- The YTD2025 figures reflect results ONLY for the first half of the fiscal year.
The following reflect SPGI's adjustments to determine FCF in prior periods.
SPGI's FCF from continuing operations to net earnings from continuing operations conversion ratio (non-GAAP) is generally greater than diluted EPS when calculated using the either the conventional or modified methods expect in FY2022. I do not foresee a change in FY2025.
FY2025 Guidance
On the Q2 2205 earnings call, management states:
We are now expecting total revenue growth in the range of 5% - 7% and continue to expect adjusted margins in the range of 48.5% - 49.5%. We remain confident in our ability to deliver solid revenue growth, strong margins and growth in adjusted EPS this year.
We do expect slightly higher growth in Ratings, Indices and Mobility, partially offset by slightly lower growth in Commodity Insights. We now expect adjusted diluted EPS in the range of $17 - $17.25, in line with the initial guidance we provided back in February and representing 10% growth YoY at the high end.
The following provides additional information regarding SPGI's FY2025 outlook.
For comparison, the following is SPGI's enterprise guidance when it released Q1 2025 results at which time management stated:
We expect billed issuance to moderate from Q1 levels for the remainder of 2025, and we have already seen declines in April. We believe some of the strength in Q1, particularly in investment grade was driven by the pull forward of some issuance to get ahead of April.
We expect the tariff discussion and related market volatility is likely leading to some pushback of issuance as well, both of which put pressure on issuance volumes in the near term.
As we look at the broader macro and commercial conditions, it's clear that we are going through a phase of unpredictable market movements, geopolitical risk and fluidity in the regulatory landscape.
Risk Assessment
I hate losing money more than I like making money which is why I pay particularly close attention to the risk aspect of my investments. Given this, I have a particular interest in a company's schedule of long-term debt.
The Q2 2025 Form 10-Q is currently unavailable as I compose this post. SPGI's short-term ($0.003B) and long-term debt ($11.385B) at the end of Q2 2025, however, is much the same as at FYE2023 and FY2024 (see below).
On August 8, 2018, Moody's upgraded SPGI's domestic senior unsecured debt from Baa1 to A3 which is the lowest tier within the upper-medium investment-grade group of ratings. This rating was affirmed on March 6, 2024.
This rating means SPGI has a STRONG capacity to meet its financial commitments. It is, however, somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.
SPGI's credit risk is acceptable from my perspective.
Dividend and Dividend Yield
SPGI's dividend history on its website only dates back to 1995 but its track record of consecutive years of dividend increases extends well beyond this.
Investors would be wise not to focus solely on the dividend return but rather the overall potential return. With most of SPGI's potential return likely to come from capital gains, it is all that much more important to acquire shares when attractively or fairly valued!
SPGI expects to return ~85% of adjusted FCF to shareholders through dividends and share repurchases.
The weighted average diluted shares outstanding for FY2019 - FY2024 and YTD2025 is reflected in the table provided in the Operating Cash Flow (OCF), Free Cash Flow (FCF), and CAPEX section of this post.
SPGI's adjusted FCF outlook remains unchanged at $5.6B - $5.8B ($5.7B average x 85% = ~$4.845B).
SPGI has repurchased ~$1.301B in the first half of FY2025. It has also recently disclosed its intent to execute additional accelerated share repurchases (ASR) totaling $1.3B in the coming weeks. This totals ~$2.601B meaning it will likely repurchase another $2.244B before FYE2025. If we use an average repurchase price of ~$550, SPGI could end up repurchasing another ~4.08 million shares.
At the end of Q2 2025, there were 305.3 million outstanding diluted shares. If we deduct ~4.08 million shares, we get very close to ~301 million shares at FYE2025.
Under an ASR agreement, SPGI pays a specified amount to the financial institution and receives an initial delivery of shares. This initial delivery of shares represents the minimum number of shares that it may receive under the agreement. Upon settlement of the ASR agreement, the financial institution typically delivers additional shares. The total number of shares ultimately delivered, and therefore the average price paid per share, is determined at the end of the applicable purchase period of each ASR agreement based on the volume weighted-average share price, less a discount.
SPGI accounts for its ASR agreements as two transactions:
- a stock purchase transaction; and
- a forward stock purchase contract.
The shares delivered under the ASR agreements result in a reduction of outstanding shares used to determine the weighted average common shares outstanding for purposes of calculating basic and diluted EPS. The repurchased shares are held in Treasury and the forward stock purchase contracts are classified as equity instruments.
Valuation
My preference is to gauge a company's valuation based on cash flow. I do, however, also consider GAAP and non-GAAP earnings guidance.
Management's revised GAAP diluted EPS guidance is $14.35 - $14.60 and the current share price is ~$546.50. Using these figures, the forward diluted PE is ~37.8 based on the ~$14.475 mid-point. The forward adjusted diluted PE is ~32 based on the ~$17.125 mid-point of management's $17.00 - $17.25 adjusted diluted EPS guidance.
The forward-adjusted diluted PE levels using the current ~$546.50 share price and broker estimates are:
- FY2025 - 23 brokers - ~31.8 using a mean of $17.16 and low/high of $16.87 - $17.30.
- FY2026 - 23 brokers - ~28.5 using a mean of $19.16 and low/high of $18.58 - $19.80.
- FY2027 - 16 brokers - ~25.5 using a mean of $21.44 and low/high of $20.77 - $22.90.
I do not rely on earnings estimates beyond the current fiscal year because I do not know how anybody can consistently accurately predict how a company is going to perform 2+ years from now.
The FYE2024 shares outstanding was 307.8 million. As noted earlier, the FYE2025 shares outstanding could drop to ~301 million. This suggests a ~304.4 million mid-point (~301 - ~307.8 million).
To estimate SPGI's valuation using FCF, divide the average of management's adjusted guidance (~$5.7B) by ~304.4 million shares to arrive at ~$18.73 in FCF/share. Divide the current ~$546.50 share price by ~$18.73 and the forward P/FCF is ~29.2.
If we estimate FY2025's SBC will be ~$0.255B (~$0.247B in FY2024), the FY2025 FCF drops to ~$5.445B ($5.7B - ~$0.255B). Divide this by 304.4 million shares and we get ~$17.90 FCF/share. Divide $546.50 by ~$17.90 and the P/FCF is ~30.5.
For comparison, I calculated SPGI's approximate valuation as follows in my April 30, 2025 post:
Management's revised GAAP diluted EPS guidance is $14.60 - $15.10 and the current share price is ~$492. Using these figures, the forward diluted PE is ~33.1 based on the ~$14.85 mid-point. The forward adjusted diluted PE is ~29 based on the ~$17 mid-point of management's $16.75 - $17.25 adjusted diluted EPS guidance.
The forward-adjusted diluted PE levels using the current share price and broker estimates are:
- FY2025 - 23 brokers - ~29 using a mean of $16.97 and low/high of $16.35 - $17.62.
- FY2026 - 23 brokers - ~25.9 using a mean of $19.03 and low/high of $18.10 - $19.74.
- FY2027 - 13 brokers - ~23.1 using a mean of $21.29 and low/high of $20.05 - $21.85.
Take these earnings estimates with a 'grain of salt'. I don't know how anybody can consistently accurately predict how a company is going to perform 2+ years from now...especially in the current environment.
In FY2025, SPGI expects to return approximately 85% of adjusted free cash flow to shareholders through dividends and share repurchases. SPGI is lowering its adjusted FCF outlook to $5.6B - $5.8B ($5.7B average x 85% = ~$4.845B). The prior guidance is ~$6.0B ($6.0B x 85% = ~$5.1B). This reduction is the result of changes in the assumptions for the timing of cash taxes, net income, and working capital.
At the end of Q1 2025, the actual shares outstanding was ~306.7 million versus 321.9, 314.1, and 307.8 at FYE 2022 - 2024.
If SPGI continues to aggressively repurchase shares while they remain undervalued, the FYE2025 shares outstanding could drop to ~300 million. The FYE2024 shares outstanding was 307.8 million so the mid-point of ~300 - ~307.8 million is ~304 million.
To estimate SPGI's valuation using FCF, divide the average of management's guidance (~$5.7B) by ~304 million shares to arrive at ~$18.75 in FCF/share. Divide the current ~$552 share price by ~$18.75 and the forward P/FCF is ~29.44.
If we estimate FY2025's SBC will be ~$0.255B (~$0.247B in FY2024), the FY2025 FCF drops to ~$5.445B ($5.7B - ~$0.255B). Divide this by 304 million shares to get ~$17.91 FCF/share. Divide $492 by ~$17.91 and the P/FCF is ~27.5.
Final Thoughts
At the time of my 2024 year end review, SPGI shares were trading at ~$496 and it was my was my 17th largest holding.
At the time of my 2025 Mid-Year Portfolio Review, SPGI had become my 6th largest holding; shares were trading at ~$527.30. Excluding the shares I have acquired for a young investor, I now hold 550 shares (350 shares in a 'Core' account and 200 shares in a 'Side' account in the FFJ Portfolio).
I like SPGI as a long-term investment. Shares, however, appear fairly valued so I am in no rush to increase my exposure.
SPGI's share price is volatile (the 52 week range is $427.14 - $558.86). A price below ~$510 is a level at which I would consider adding to my exposure.
I wish you much success on your journey to financial freedom.
Note: Please send any feedback, corrections, or questions to [email protected].
Disclosure: I am long SPGI.
Disclaimer: I do not know your circumstances and do not provide individualized advice or recommendations. I encourage you to make investment decisions by conducting your research and due diligence. Consult your financial advisor about your specific situation.
I wrote this article myself and it expresses my own opinions. I do not receive compensation for it and have no business relationship with any company mentioned in this article.
