Baird Calls IHS Markit Attractively Valued, Upgrades To Outperform

IHS Markit Ltd INFO is likely to generate solid adj. EPS growth for a few years, despite “cyclical/temporary headwinds in certain verticals,” Baird’s Jeffrey P. Meuler said in a report. He upgraded the rating on the company to Outperform, while raising the price target from $39 to $41.

IHS Markit is scheduled to report its FQ3 results on September 27, and is likely to reiterate its preliminary outlook for 2017, analyst Meuler stated.

Attractive Valuation

“We view INFO as an attractively valued portfolio of high quality information solutions businesses,” Meuler wrote. Although IHS Markit faces headwinds in certain verticals, it would likely generate strong multi-year adj. EPS growth, backed by “significant self-help components.” The company has the potential to be “an attractive acquisition/capital deployment platform.”

Solid EPS Growth

The analyst enumerated the following reasons for IHS Markit being well positioned for solid y/y adj. EPS growth in FY17:

• Underlying organic revenue growth at combined IHS Markit, albeit slightly modest
• Continued underlying IHS operating margin expansion, although pace may decelerate from the strong FY16 levels
• Opex synergies largely from shared services savings
• Tax synergies
• Share repurchases
• Some year-one revenue synergies

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