The financial sector has gone through a tough year. After all, banks have witnessed interest rates come down to historic lows and the pandemic has led to delinquencies and defaults in terms of loan repayments. However, some financial stocks have done well despite all the challenges that the year 2020 brought. Some large banks that have trading and investment banking operations were able to balance out the downturn in consumer and commercial banking. Investment research and rating companies like Morningstar also saw the demand for their services hold up. This niche segment might be an interesting place to find stocks to invest in.
Morningstar’s 3Q2020 Earnings
Morningstar reported its third-quarter 2020 earnings results in October 2020. Revenue was up from $313 million in the third quarter of 2019 to $357 million in the third quarter of 2020. The operating income was down from $49 million to $44 million. However, a significant holding gain on previously held equity interest boosted net income to $76 million, up from $49 million in Q32019. As a result, the earnings per share came in at $1.76 as opposed to $1.14 in the same quarter the previous year.
Company CEO Kunal Kapoor said, “We are pleased with our 2020 performance thus far.” He further added, “In addition, we were thrilled to welcome the Sustainalytics team to our organization. We’ve made notable progress on our integration and together continue to see ample opportunities for meeting investor needs. As the current environment sheds light on global risks such as climate change, population health, and human capital concerns, investor interest in ESG factors is rising across our business.”
One of the major themes currently playing out is the shift towards ESG investing. Investors, institutional and retail, are increasingly asking questions to their fund managers about what the carbon footprint of their portfolio is. They also want to know whether the businesses in which their money gets invested reflect their own personal values. In such a scenario, companies like Morningstar, which are pursuing major initiatives in offering ESG products, are poised to benefit.