S&P 500   4,594.62
DOW   34,899.34
QQQ   391.20
S&P 500   4,594.62
DOW   34,899.34
QQQ   391.20
S&P 500   4,594.62
DOW   34,899.34
QQQ   391.20
S&P 500   4,594.62
DOW   34,899.34
QQQ   391.20

Is IHS Markit Ltd (NYSE:INFO) Still A Buy?

Wednesday, January 13, 2021 | Thomas Hughes
IHS Markit Q4 Earnings Nothing To Write Home About

IHS Markit (NYSE:INFO) emerged as a pandemic winner over the summer for a couple of reasons that really don’t have much to do with the pandemic. The company isn’t a stay-at-home consumer goods retailer and it isn’t in the business of eCommerce or tech other than using it to connect with its clients. The company saw its revenue fall nearly 10% in the calendar 2nd quarter of 2020 so it wasn’t immune so why was it a winner? Because the company’s revenue fell less than expected, the outlook for the rebound was good if not robust, and there was a dividend to consider.

As a purveyor of market data, its services, at least some of them, came into high-demand helping to offset areas of weakness and return the company to YOY growth. The problem is that 1) growth is tepid and in the low-single digits and 2) the growth and earnings the company reported for the Q4 period are nothing more than what the market was expecting. In this time of high expectations and valuations (shares of INFO trade close to 30X earnings) giving the market only what it expects may not be enough to keep shares prices from falling.

IHS Markit Rises On Mixed Results

Shares of IHS Markit rose about 1.0% in pre-opening trading following what can only be called a mixed report. The company’s $1.11 billion in revenue is up 2.8% on a YOY basis but only in-line with the consensus and driven entirely by acquisitional growth. On an organic basis, revenue is down slightly from the year-ago period on mixed segment results. On a segment basis, the Financial Services and Transportation segments grew 7% and 4% respectively while Resources and Consolidated Markets & Solutions fell -11% and -2.0%.

Moving down the report, the company’s gross margins came in at 42% while net margins came in at 13.6%. The GAAP earnings of $0.38 fell short by $0.02 while adjusted earnings of $.72 beat by $0.05. The good news here is that adjusted earnings are up on a YOY basis, that news is offset however by the YOY decline in GAAP earnings. Looking at things from the balance sheet perspective, cash from ops came in at $338 million or up slightly on a YOY basis with FCF of $275.0 million. The free cash flow is important because the company is acquiring growth where it can and paying a dividend that is expected to grow.

IHS Markit Returns Cash To Shareholders

IHS Markit initiated dividend payments at the end of 2019 and has proven to be a stable payer during 2020. The stock is yielding less than 1.0% at this time but there is a high-expectation for dividend increases in the future. Based on the company’s payout ratio (about 24%), FCF, and balance sheet future dividend increases could be large and repetitive on an annual basis.

The Technical Outlook: IHS Markit Is At An Inflection Point

Shares of IHS Markit opened the session lower despite early indications of upward movement in the premarket session. Price action is sitting just above the bottom of a recently formed trading range and may move down to test that bottom in the near term. Support is possible at or near the $85 level but it is not guaranteed. If price action falls below that level a move down to $84 and even $80 is possible. Longer-term, price action will likely trend sideways within a range until the broader economic reopening gets underway. At that time revue and earnings growth should accelerate and drive the stock higher.

Is IHS Markit Ltd (NYSE:INFO) Still A Buy?

Should you invest $1,000 in IHS Markit right now?

Before you consider IHS Markit, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and IHS Markit wasn't on the list.

While IHS Markit currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The 5 Stocks Here


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
IHS Markit (INFO)2.0$127.32-1.9%0.63%82.14Hold$117.00
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