What to expect from IHS Markit’s fourth quarter 2020 results?


IHS Markit (NYSE: INFO), a leading provider of information, research, analysis and technology, is expected to release its fourth quarter and full year 2020 results on Wednesday before markets open. We expect the company to post revenue of around $ 1.11 billion in the fourth quarter of 2020, with adjusted EPS of around $ 0.64 per share, both roughly stable from the previous year. last year. IHS Markit was hit by Covid-19, with revenue down around 4% year-over-year to $ 1.07 billion in the third quarter of 2020. This was due to slower delivery of implementations software and weaker software sales, a relatively tough automotive market, and energy market challenges. However, this was partially offset by growth in the financial services segment, which saw revenue increase by around 4% to $ 446 million. In the fourth quarter, the financial services segment is likely to continue its steady performance while the transportation segment is expected to experience a recovery, driven by offerings such as CARFAX – which provides vehicle history reports – which are expected to benefit the strength of the used car market.

See our analysis IHS Markit Q4 2020 Preview: Is Profit Beating the Cards? for a detailed look at what to expect from IHS Markit and how it has performed over the past few quarters.

[12/1/2020] Why S&P Global wants to buy IHS Markit

S&P Global (NYSE: SPGI) has announced that it will acquire IHS Markit (NYSE: INFO) in a deal that could combine two of the largest providers of financial data. The all-equity deal will value IHS Markit at around $ 44 billion. [1] The transaction is expected to close in the second half of 2021, subject to regulatory approval. S & P’s interest in IHS is justified. The financial reporting market has grown rapidly, thanks to more complex products and algorithm-based strategies that have increased the demand for data. Global spending on financial market data increased by about 6% in 2019 to about $ 32 billion, according to Burton-Taylor International Consulting. [2] The market has also remained relatively resilient thanks to Covid-19, in part due to increased market volatility.

While S&P Global made nearly half of its revenue from credit rating services in 2019, financial and market information accounted for around 30% of its revenue, with the rest of its revenue coming from indices and energy data. IHS Markit, on the other hand, has doubled its financial data space in part through acquisitions, with its financial services
emerging segment as its largest company, accounting for about 40% of revenue last year. IHS Markit’s main financial information offerings include price and benchmark data for various asset classes, valuation services and financial indices. Much of the data collected by IHS is complex (data on derivatives like credit default swaps, for example) and is not readily available, making it valuable to S&P. IHS also offers software platforms – which include tools that banks use to secure corporate equity and bond offerings – as well as transaction processing and other related services. The other segments of IHS such as energy (which provides data on drilled wells, prices, pipelines) could be integrated into the energy supply of S&P, Platts. Overall, the deal would give S&P Global significant stature and a broader product line, allowing it to take on the likes of Bloomberg LP.

[Updated 11/11/2020] Why is the IHS Markit title soaring?

IHS Markit Stock (NYSE: INFO) is up around 20% year-to-date and is around 2x from lows seen in mid-March, trading at levels of around $ 91 per share . So what is driving the skyrocketing stock prices? First, investors have doubled their stocks of small cap companies with high levels of income visibility during the current pandemic and IHS is doing the trick with a focus on information services and its largely market-based model. subscriptions (around 85% of revenue is recurring). While the pandemic has certainly hurt demand, the long-term situation is unlikely to change for the company, as the information and insights it provides is unique and valuable to businesses, with transfer costs remaining high for the company. most customers.

Second, IHS’s financial situation is also holding up fairly well, despite the pandemic. While revenues are likely to decline this year, as the transportation and resource segments of society have seen demand drop due to Covid-19 and related lockdowns, this will be partially offset by the growth in the Financial Services business – the largest vertical sector of the company – which is benefiting from the current volatility in financial markets. Next year is expected to be better, with the company guiding organic revenue growth of 6% to 8%. IHS Markit’s profitability also looks good, despite the pandemic. Although revenues are falling this year, EPS is expected to increase thanks to significant cost reductions. This should help margins in the long run, with the company projecting around 100 basis points of margin expansion next year. [3]

See our analysis on Why has IHS Markit share doubled since 2017? for more details on how IHS revenue, margin and valuation metrics have evolved over the past several years.

[Updated 10/13/2020] After 75% rally, IHS Markit stock appears to be set at $ 80

IHS Markit Stock (NYSE: INFO) is a leading provider of information, research, analysis, and technology, with the Company’s customers, including major industries, financial markets and governments around the world. After rising 75% from the low on March 23 of this year, at the current price of around $ 80 per share, we believe the company has reached its near-term potential. IHS Markit stock fell $ 45 to $ 80 from the recent low against the S&P which has moved 55% over the same time frame. The company’s lean capex business model, strong cash reserves, along with a rebound in oil prices, helped the stock beat markets overall. In addition, the stock is up 75% from levels seen in early 2018, more than two years ago. IHS Markit’s stock has risen to where it was before February’s drop due to the coronavirus outbreak turning into a pandemic. This seems to make it fully valued as, in reality, demand and income will likely be lower than last year. Our dashboard, ‘Why has INFO Stock moved 75%? provides the key figures for our thinking, and we explain more below.

Part of the rise in stock prices over the past 2 years is justified by the growth of around 23% in IHS Markit’s revenue, which rose from $ 3.6 billion in 2017 to $ 4.4 billion dollars in 2019, the effect of which was partially offset by a 1.7% reduction in net income. margin (which increased from 11.6% in 2017 to 11.4% in 2019). Together, this helped boost net income by 20.6%, from $ 417 million in 2017 to $ 503 million in 2019. Growth in earnings, per share, was a little higher at 21.2 % due to a slight decrease in the number of shares.

Finally, IHS Markit’s P / E multiple fell from 43x at the end of 2017 to 60x at the end of 2019. While the company’s P / E has now risen to 62x, it appears to be trading on the upper end of the spectrum, when the current P / E is compared to levels seen in recent years – P / E of 60x at the end of 2019 and 43x until 2017. We believe there is a possible downside risk for the multiple of IHS Markit from levels seen above in recent years, and the stock is unlikely to rise after the recent rally and potential weakness of a recession brought on by the Covid outbreak.

What is the impact of the coronavirus on the action of IHS Markit?

The global spread of the coronavirus has affected industrial and economic activity across the globe, which is likely to have a negative impact on the company’s revenues in all operational segments, especially the transportation and resource segments. . The economic downturn is likely to reduce spending by businesses in all industries globally, which will significantly hurt demand for the company’s offerings. The transportation segment in particular will also be affected as the slowdown negatively affects the global automotive market. In addition, companies will postpone / suspend spending in an effort to cope with the short-term shock to consumer spending. Nonetheless, demand for IHS Markit’s financial services will remain optimistic due to heightened volatility in financial markets, which rose 4% in its third quarter 2020 (end of August) results, while other segments experienced a drop in their income. In addition, in its first quarter results, IHS Markit provided scenario-based outlook for fiscal years 20 and 21 to incorporate the impact of Covid-19 and falling oil prices. In the worst case scenario, the company expects the economic recovery to start as late as 2021.

Actual recovery and its timing depend on wider containment of the spread of the coronavirus. Our dashboard Trends in Covid-19 cases in the United States provides insight into the spread of the pandemic in the United States and contrasts with trends in Brazil and Russia. Following the Fed’s stimulus – which set a floor on fear – the market was willing to “look through” the current period of weakness and take a longer-term view. As investors focus on the 2021 results, valuations become important in finding value. Although market sentiment may be volatile, and evidence of a rise in new cases could scare investors again.

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