Jan. 28 was a very cold day in New York: the city was digging out from heavy snowstorms, and temperatures had dropped to 11 degrees Fahrenheit overnight. That was the day I recommended S&P Global, the storied company of the eponymous index, credit ratings, and proprietary data, to Barron's readers. I had been impressed with S&P's years of uninterrupted quarterly top and bottom-line growth, free cash flow generation, and share repurchases. This century-plus old company was poised to become the next hot stock, potentially returning 49% to investors over the next 12 months.
Those cold winter winds would soon cause more than temperatures to drop: by Feb. 11 S&P's shares had fallen 26% since that bitter January day. Shares in any company perceived to be software or information related were dumped by investors convinced that they would be frozen out of business by AI.
Eight months after the pick was first published, S&P Global's stock has still not completely thawed from February's chill. Yet this doesn't mean that it has been universally shunned: an analysis of ownership data from FactSet reveals bullish leanings among institutional investors. At first glance, these investors seem evenly split, with 44% having increased positions as of June 30, versus 42% which have decreased their holdings in the stock, according to 13F filings with the Securities and Exchange Commission. Fourteen percent of the group made no change. However, among the 100 largest investors, ranked by shares held, 47 increased holdings by 15.3 million shares, in contrast to 53 which shed 9 million shares -- a net increase of more than 6 million shares.
Focus Partners Wealth nearly doubled its stake to 583,000 shares in the second quarter. "I pitched S&P Global for inclusion in our concentrated, large-cap strategy earlier this year in May," says Keshav Merchant, lead equity research analyst at Focus Wealth Partners. "Our view was that at the price we were paying, we were nearly getting the Market Intelligence business for free." Focus Partners owns about $259 million-worth of SPGI stock. "AI disruption fears were overblown given the proprietary and contributory nature of much of S&P Global's data, the fact that its workflow tools are highly embedded in regulated financial services customers, and because those workflow tools often embed data that is unique to SPGI."
Apparently, S&P Global's customers are also ignoring the AI debate: the company's revenue grew 10.4% year over year in the second quarter ending June 30, while diluted earnings per share jumped 17.6% over the same period. Margins on earnings before interest, taxes, depreciation, and amortization (Ebitda) expanded sequentially 109 basis points to 54.2%. The company's ratings division, which comprises 35% of S&P Global's revenue, saw billed issuance of credit grow by 25% in the second quarter, to $1.3 billion. Moreover, the promised spinoff of Mobility Global closed on July 1, providing S&P Global investors with a company focused on its core competencies.
Since the February Saaspocalpyse, I have written two follow-ups on S&P Global, the first detailing a significant insider purchase, the other reassuring Barron's readers of the company's ability to continue delivering to customers and shareholders alike. In this third follow-up I recommend that Barron's readers warm up to S&P Global and have reset its 12-month target price. The stock is down 11% from my initial recommendation on Jan. 28 but it is up 15% from its year to date Oct. 2 low of $386.27.
Some investors are still skeptical of S&P Global. "The earnings estimate revisions for the company were considerably worse than those for rival Moody's after both the 4Q'25 and 2Q'26 reports," says Neuberger Berman portfolio manager James Baker. "There also seem to be lingering fears about the Market Intelligence business whether from AI disruption or possible market share losses to a reinvigorated FactSet." Moody's for its part "seems relatively easy to understand" as its definition of non-GAAP earnings involves fewer adjustments than S&P Global. Nevertheless, Baker is surprised at "how big a discount the stock now has to Moody's and how poorly SPGI has performed this year."
S&P Global trades at 22 times forward earnings, offers a modest 0.9% dividend yield but share repurchases, expected to total $7 billion in 2026, will return about 5.4% in capital. Shares generate a free cash flow yield of 4.3%. Management has raised revenue guidance slightly and forecasts 2026 earnings of about $17.63 per share. A reflation of the company's multiple to 2025's 30 times forward earnings results in a revised 12-month target price of $529, corresponding to 19% above current levels. A discounted cash flow valuation using a working average cost of capital of 8.51%, a terminal value of $128.1 billion and perpetual growth of 3% produces a slightly higher target price of $560. The average of these two methods yields a target price of $544, about 23% higher than the stock's current price.
They say, "three time's a charm." At this moment of my third follow-up, it may be time for investors to add one from S&P Global.
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