Updated Aug 14 at 11:31am ET.
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Analysts estimate that the global build-out of AI infrastructure will require roughly 2 trillion dollars in debt financing. This is a significant development for the company because its ratings business acts as a toll booth on the debt markets. For large companies to borrow these sums from institutional investors, they almost always need a formal credit rating, which is an assessment of how likely they are to pay back the loan.
While the biggest tech companies have plenty of cash, the sheer scale of this spending, projected at over 200 billion dollars for some individual firms, suggests a high volume of new bond issuance. Since the company earns a fee on nearly every major corporate bond that comes to market, this infrastructure cycle provides a long-term runway for its most profitable division.
Source: Forbes
The company has appointed Keith Demmings to its board of directors, effective November 1. Demmings is currently the head of Assurant, a firm that handles insurance and protection services for electronics and vehicles. Adding a sitting CEO from the insurance world is a standard move for a financial firm, as it brings in outside expertise on how large clients manage risk and use financial data.
Source: 8-K filing
The company reported earnings of $4.68 per share, which was about 10 percent higher than what analysts expected. Revenue grew to $2.19 billion, a 15 percent increase from the same time last year. This growth was driven by strong activity in the credit ratings business, which acts as a toll booth for companies that need to borrow money by issuing debt.
Profitability also improved, with adjusted operating margins, the percentage of revenue left after paying for the costs of running the business, expanding to over 55 percent. This shows that the company can handle more volume without its costs rising at the same rate. For long-term owners, this quarter confirms that the business remains a central part of global finance and is successfully using its data and analytics to drive higher profits.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Analysts raised their price targets across the board following the company's strong second-quarter earnings report in late July. Most analysts rate the stock a buy, and the average target of $545 suggests a 13% gain from today's price.
Management has a perfect record of clearing the bar they set for analysts, often beating profit expectations by a wide margin over the last two years.
| Expectation | |
|---|---|
| EPS | $4.26 |
| Revenue | $2.07B |
