Credit Suisse analyst Ashley Serrao initiated coverage of fourratings and business intelligence companies operating with shifting trends in informationgathering and investment strategies and beneath a mixed global macroeconomic outlook.
In separate research notes, Serrao rated as "outperform"shares of FactSet Research SystemsInc., MSCI Inc.and S&P Global Inc.Serrao began coverage of Moody's Corp.with a "neutral" rating.
FactSet has been able to find revenue streams that do not relyon headcount growth, Serrao wrote. It is expected that the company would be ableto monetize its client relationships and take advantage of the pressure on bothsell-side and buy-side research to manage costs. Driving growth for the companywill be high-net-worth wealth management, rise in content delivery through datafeeds, taking advantage of international growth and cross sales of Portware, Serraosaid.
His initial target price for FactSet is $182. He set EPS estimatesat $6.42 for fiscal 2016, $7.27 for fiscal 2017 and $7.91 for fiscal 2018.
The analyst thinks Moody's has a great deal of exposure to theratings business, which comprises 82% of Moody's EBITDA. The analyst believes thebusiness is operating close to peak margins following a boom in debt issuance. Theanalytics business, on the other hand, boasts secular trends and pricing advantagein research. The analyst added that the company is expected to offsetany negative revenue movements with acquisition.
Serrao's price target is $99. He estimates EPS at $4.50 for 2016,$4.97 for 2017 and $5.48 for 2018.
The analyst described MSCI's prospect for growth as "underappreciated,"with three secular trends to drive it. The shift from active to passive investmentmanagement, the better growth experienced by emerging markets compared to the growthof developed economies and the globalization of investing can drive double-digitgrowth during the next three years, the analyst said. Further, Serrao anticipatesMSCI will be able to boost margins in analytics and its other segments, which iscomposed of ESG and real estate products. Also, Bountiful free cash flow shouldresult in stock repurchases and small tuck-in deals, the analyst said.
Serrao initiated coverage with a target price of $88 and EPSestimates of $2.93 for 2016, $3.50 for 2017 and $4.21 for 2018.
The analyst thinks S&P Global's product offerings gives thecompany pricing power, strong revenue and the ability to generate significant freecash flow. Further, the company owns iconic brands with high margins, such as S&PGlobal Ratings, S&P Dow Jones and Platts. Serrao also said S&P's revenuesfrom its ratings business is less cyclical and is set to gain from recurring relationships.
Moreover, the analyst sees Platts and SNL as underappreciatedassets that can together exhibit 10% to 12% annual growth in the next few years.
Serrao set his target price at $123 and EPS estimates of $5.03for 2016, $5.74 for 2017 and $6.61 for 2018, pro forma for the sale of JD Power.
S&P Global Inc. ownsS&P Global Market Intelligence and S&P GlobalRatings.