S&P Global reported third quarter 2017 results with revenue of $1,513 million, an increase of 5% compared to the same period last year.  On an organic basis, third quarter revenue increased 12% with strong growth in every business segment.

Net income decreased 54% to $414 million and diluted earnings per share declined 52% to $1.61 as a result of the prior period benefiting from a pre-tax gain of $722 million on the sale of J.D. Power.   Adjusted net income increased 16% to $442 million and adjusted diluted earnings per share increased 19% to $1.71. The adjustments in the third quarter of 2017 were for deal-related amortization and restructuring.  Both net income and adjusted net income benefited from an accounting change associated with the recognition of excess tax benefits from stock-based compensation in 2017.

Margin: The Company’s operating profit margin declined by 5,020 basis points to 43% due to a gain in the prior period from the sale of J.D. Power.  The adjusted operating profit margin improved by 190 basis points to 46% due to strong organic revenue growth, the sale of lower margin businesses, and productivity initiatives.

Return of Capital: During the third quarter, the Company returned $604 million to shareholders through a combination of $104 million in dividends and $500 million in the form of an accelerated share repurchase (ASR) agreement. Under the ASR, 2.8 million shares were repurchased during the third quarter. Later this month, the ASR will be completed and we expect to receive additional shares.

Ratings:  Revenue increased 15% to $739 million in the third quarter.  Transaction revenue increased 24% to $372 million primarily from strength in corporate bonds, structured products, and bank loans.  Non-transaction revenue increased 7% to $367 million due to growth in fees associated with surveillance, entity ratings, and short-term debt including commercial paper.

U.S. revenue increased 15% and international revenue, led by gains in Asia-Pacific and Canada, also increased 15%.  International revenue represented 42% of third quarter revenue.  With the exception of U.S. public finance, every major ratings sector delivered revenue growth with the largest gains in corporates and structured products.

Operating profit increased by 9% to $376 million. The operating profit margin declined 300 basis points to 51% compared to the third quarter of 2016 due to the benefit from insurance recoveries in the prior period.  Adjusted operating profit increased 19% to $392 million. The adjusted operating profit margin improved 170 basis points to 53%.

Market and Commodities Intelligence:  Revenue decreased 6% to $615 million in the third quarter of 2017 due to the divestitures of J.D. Power, the SPSE/CMA pricing businesses, Equity and Fund Research in the fall of 2016 as well as QuantHouse earlier this year.  Excluding revenue from these divestitures and the acquisition of PIRA, organic revenue grew 7%.  Quarterly operating profit decreased 77% to $208 million and the operating profit margin declined 10,650 basis points to 34% due primarily to a gain on the sale of J.D. Power in the prior period.  Adjusted operating profit increased 1% to $230 million despite the loss of earnings from divested businesses.  Adjusted operating profit margin increased 270 basis points to 37% primarily due to strong organic revenue growth, divestments of lower margin businesses, and SNL integration synergies.

Market Intelligence revenue decreased 2% to $422 million due to divestitures.  Excluding divestitures, organic revenue increased 8% with solid gains across the business including Desktop, Data Management Solutions (formerly Enterprise Solutions), and Risk Services.

Platts revenue increased 10% to $193 million aided by the acquisition of PIRA.  Excluding this acquisition, Platts organic revenue grew 6% due to increased subscriptions and strong growth in Global Trading Services.

S&P Dow Jones Indices: S&P Dow Jones Indices LLC is a majority owned subsidiary.  The consolidated results are included in S&P Global’s income statement and the portion related to the 27% noncontrolling interest is removed in net income attributable to noncontrolling interests.

Across the industry, investments in passive funds continue to set new records with year-to-date inflows for exchange-traded products reaching $458 billion.  Quarter ending ETF AUM associated with our indices reached a new record of $1,214 billion, surpassing $914 billion on September 30, 2016 and the prior quarter’s ending record of $1,156 billion set on June 30, 2017.

Revenue increased 14% to $187 million in the third quarter of 2017 compared to the same period last year primarily due to a 17% increase in asset-linked fees.  Revenue from ETFs is the largest component of asset-linked fees, and average ETF AUM associated with the Company’s indices increased 31%.

Operating profit increased 10% to $119 million and the operating profit margin decreased 180 basis points to 64%.  Adjusted operating profit increased 10% to $120 million and the adjusted operating profit margin decreased 190 basis points to 64%.  The decline in both the operating profit margin and the adjusted operating margin were the result of an increase in performance driven costs and additional investments, particularly the Trucost acquisition.  Operating profit attributable to the Company increased 8% to $86 million.  Adjusted operating profit attributable to the Company increased 8% to $87 million.

Outlook: The Company is increasing its 2017 EPS guidance. On a GAAP basis, diluted EPS was expected to be a range of $5.83 to $5.98 and is increased to a range of $6.19 to $6.34. Adjusted diluted EPS was expected to be a range of $6.15 to $6.30 and has been increased to a range of $6.55 to $6.70.

Source:  S&P Global