Morgan Stanley analysts Toni Kaplan and Jeffrey Goldstein continue to see growth opportunities for information services companies in 2020, even as their covered companies in that sector already grew by an average of 45% in 2019.
Kaplan and Goldstein upgraded TransUnion, S&P Global Inc. and Verisk Analytics Inc. to "overweight" from "equal-weight."
The analysts believe that Wall Street is underestimating TransUnion's growth opportunities from newer products, newer verticals and international expansion. They expect 9% revenue growth for the firm in 2020.
For S&P Global, the analysts said they are confident of sustained mid-single-digit growth, with roughly 100 basis points of annual margin expansion driving low-double-digit EPS growth. They cited strong growth tailwinds across segments, leading to diversified growth drivers.
Kaplan and Goldstein noted that the recent pullback in Verisk Analytics' stock price created an attractive entry point for investors to own a business with low-double-digit EPS growth and a strong moat at a one-turn discount to the average of its peers. The company's new products, insurance automation and international expansion are expected to drive long-term revenue growth opportunities.
The price targets have been raised to $100 from $84 for TransUnion, $176 from $162 for Verisk Analytics and $323 from $271 for S&P Global.
For TransUnion, the adjusted EPS estimates are $3.18 for 2020 and $3.61 for 2021. The analysts expect diluted EPS for S&P Global of $10.41 for 2020 and $11.45 for 2021, and adjusted EPS of $4.92 for 2020 and $5.49 for 2021 for Verisk.
The analysts wrote that they prefer TransUnion over Equifax Inc., S&P Global over Moody's Corp., and Verisk Analytics over FactSet Research Systems Inc. since they trade at similar or lower multiples, and offer greater growth with similar business risk.
Kaplan and Goldstein also upgraded Moody's to "equal-weight" from "underweight" given the reduced caution on the issuance environment, compared to conditions during the second half of 2018 to the first half of 2019.
The price target for Moody's was raised to $224 from $181, while the adjusted EPS estimates are $9.04 for 2020 and $10.07 for 2021.
S&P Global Inc. is the parent company of S&P Global Market Intelligence.