Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Moody’s Corp. (MCO - Analyst Report) reported earnings of 85 cents per share in the fourth quarter of 2013, which jumped 21.0% from the year-ago quarter and beat the Zacks Consensus Estimate by 8 cents.

Quarter Details

Revenues increased 3.0% year over year to $779.2 million, which beat the Zacks Consensus Estimate of $746.0 million. The year-over-year growth was driven by strong performance from both Moody’s Investors Service (MIS) and Moody's Analytics (MA).

Domestic revenues increased 3.0% year over year to $417.2 million in the reported quarter. International revenues increased 3.0% year over year to $362.0 million in the quarter.

Segment-wise, MIS revenues increased 1.0% year over year to $522.8 million. MIS revenues in the U.S. declined 2.0% on a year-over-year basis, while revenues outside the U.S. increased 5.0% from the year-ago quarter.

Within the MIS segment, Global Corporate Finance revenues decreased 1.0% year over year to $242.6 million, reflecting a contraction in U.S. bond issuance.

Global Structured Finance revenues increased 6.0% year over year to $108.8 million, primarily due to weaker issuance volume in the overseas markets.

Global Financial Institutions revenues increased 3.0% year over year to $88.9 million in the quarter, due to higher revenues from asset management companies. Global public, project and infrastructure finance revenues were down 3.0% year over year to $82.5 million.

MA revenues grew 9.0% year over year to $256.4 million, buoyed by a strong increase in Research, Data and Analytics revenues (up 9.0%), Professional Services revenues (up 16.0%) and Enterprise Risk Solutions revenues (up 7.0%).

MA revenues increased 21.0% in the U.S., while outside the U.S. it increased 1.0% on a year-over-year basis in the reported quarter.

Operating expenses decreased 5.0% year over year to $467.3 million. As a result, operating income increased 20.0% year over year to $311.9 million in the fourth quarter. Operating margin was 40.0% compared with 34.5% in the year-ago quarter.  

Net income jumped 29.1% year over year to $206.7 million in the reported quarter.

Moody's exited the quarter with $2.11 billion in cash and cash equivalents and short-term investments. At quarter-end, Moody’s had $2.10 billion in outstanding debt. The company bought back 2.0 million shares for $145.5 million during the quarter.

Guidance

Moody’s expects 2014 revenues to grow in the high single-digit percent range. Operating expenses are projected to increase in the mid single-digit percent range. Operating margin is projected to be between 42% and 43%.

Earnings for 2014 are expected to be in the range of $3.90 to $4.00 per share. The mid-point of the guidance is much better than the Zacks Consensus Estimate of $3.92.

For 2014, share repurchases are expected to be approximately $1.0 billion. Capital expenditure is projected to be approximately $90.0 million. Moody’s expects approximately $100.0 million in depreciation and amortization expense. Free cash flow is expected to be $900.0 million.

MIS revenues for 2014 are expected to increase in the mid single-digit percent range. U.S. MIS revenues are expected to increase in the low single-digit percent range, while non-U.S. MIS revenues are expected to increase in low-double digit percent range.

Corporate finance revenues are projected to grow in the high single-digit percent range. Revenues from structured finance are expected to grow in the low single-digit percent range, while revenues from financial institutions are expected to grow in the mid single-digit range. Public, project and infrastructure finance revenues are expected to increase in the high single-digit range.

MA revenues for 2013 are expected to increase in the high single-digit percent range. In the U.S., revenues are expected to increase in the low double-digit percent range. Non-U.S. revenues are expected to increase in the mid single-digit percent range.

Revenues from research, data and analytics are projected to grow in the high-single-digit percent range. Revenues from enterprise risk solutions are expected to grow in the low-teens percent range. Professional services revenues are expected to grow in the mid forties range.

Our Recommendation

Moody’s provided positive outlook for 2014. We believe that Moody’s remains a solid franchise in rating debt instruments based on its diversified credit research business model and international growth opportunities. However, the company’s modest third-quarter result and cautious revenue projections suggest sluggish macroeconomic environment in our view.

Moreover, increasing competition from the likes of privately held Fitch, McGraw Hill Financial’s (MHFI - Analyst Report) Standard & Poor's division, Dun & Bradstreet (DNB - Analyst Report) and Euronet (EEFT - Snapshot Report) is a major concern, going forward.

Currently, Moody’s has a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%