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Why Is Moody's (MCO) Up 1.2% Since Last Earnings Report?
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It has been about a month since the last earnings report for Moody's (MCO - Free Report) . Shares have added about 1.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Moody's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Moody's Q1 Earnings & Earnings Beat Estimates
Moody's reported first-quarter 2021 adjusted earnings of $4.06 per share, which handily surpassed the Zacks Consensus Estimate of $2.80. Also, the bottom line grew 49% from the year-ago quarter.
Results benefited from solid bold issuance volume, which led to strong revenue growth. Also, the company’s liquidity position was robust during the quarter. However, higher operating expenses acted as headwind.
After taking into consideration certain non-recurring items, net income attributable to Moody's Corporation was $736 million or $3.90 per share, up from $488 million or $2.57 per share in the prior-year quarter.
Revenues Improve, Costs Up
Revenues of $1.6 billion beat the Zacks Consensus Estimate of $1.42 billion. Also, the top line jumped 24% year over year. Foreign currency translation favorably impacted the top line by 3%.
Total expenses were $747 million, up 7% from the prior-year quarter. Also, foreign currency translation negatively impacted operating expenses by 3%.
Adjusted operating income of $914 million surged 41%. Adjusted operating margin was 57.1%, up from 50.3% a year ago.
Robust Segment Performance
Moody’s Investors Service revenues soared 30% year over year to $1 billion. Foreign currency translation favorably impacted the segment’s revenues by 3%.
Corporate finance revenues increased, driven by solid leveraged loan and speculative grade bond activity in the United States and EMEA. Also, financial institutions’ revenues grew, primarily backed by favorable mix of infrequent U.S. securities firms and insurance companies.
Further, public, project and infrastructure finance revenues rose from the year-ago level, reflecting refinancing in the utilities sector. Moreover, structured finance revenues were up mainly driven by significant increase in collateralized loan obligation refinancing activity and commercial mortgage-backed securities issuance.
Moody’s Analytics revenues grew 14% year over year to $564 million. Foreign currency translation favorably impacted the segment’s revenues by 4%.
The segment recorded growth in research, data and analytics revenues, as well as Enterprise Risk Solutions revenues.
Strong Balance Sheet
As of Mar 31, 2021, Moody’s had total cash, cash equivalents and short-term investments of $2.9 billion, up from $2.7 billion on Dec 31, 2020. Further, it had $6.3 billion of outstanding debt and $1 billion in additional borrowing capacity under the revolving credit facility.
Share Repurchase Update
During the quarter, Moody's repurchased 0.5 million shares for $132 million.
Upbeat 2021 Guidance
Following solid first-quarter 2021 performance, Moody’s raised full-year guidance. The company now expects adjusted earnings in the range of $11.00-$11.30 per share, up from prior expectation of $10.30-$10.70 per share.
On GAAP basis, earnings are now projected within $10.40-$10.70 per share. Earlier, the company had expected GAAP earnings in the range of $9.70-$10.10 per share.
Moody’s projects revenues to increase in the high-single-digit percent range, up from the prior anticipation of growth in the mid-single-digit percent range.
The company projects operating expenses to increase in the mid-single-digit percent range.
Net interest expenses are expected to be in the range of $160-$180 million, down from prior guidance of $190-$210 million.
Adjusted operating margin is expected to be roughly 50%, a change from 49-50% range provided earlier. Also, operating margin is now likely to be nearly 46%, up from previous target of approximately 45%.
Moody’s expects cash flow from operations to be $2.2-$2.3 billion and free cash flow of $2.1-$2.2 billion.
The company will likely repurchase shares worth $1.5 billion.
Effective tax rate is likely to be 20-22%.
Segment Outlook for 2021
MIS segment revenues are likely to increase in the mid-single-digit percent range, a change from prior guidance of remaining flat year over year. Adjusted operating margin is now expected to be approximately 61%, a rise from previous outlook of roughly 60%.
Coming to the MA segment, Moody’s anticipates revenues to grow in the low-double-digit percent range. Adjusted operating margin is expected to be 30%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Moody's has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise Moody's has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Moody's (MCO) Up 1.2% Since Last Earnings Report?
It has been about a month since the last earnings report for Moody's (MCO - Free Report) . Shares have added about 1.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Moody's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Moody's Q1 Earnings & Earnings Beat Estimates
Moody's reported first-quarter 2021 adjusted earnings of $4.06 per share, which handily surpassed the Zacks Consensus Estimate of $2.80. Also, the bottom line grew 49% from the year-ago quarter.
Results benefited from solid bold issuance volume, which led to strong revenue growth. Also, the company’s liquidity position was robust during the quarter. However, higher operating expenses acted as headwind.
After taking into consideration certain non-recurring items, net income attributable to Moody's Corporation was $736 million or $3.90 per share, up from $488 million or $2.57 per share in the prior-year quarter.
Revenues Improve, Costs Up
Revenues of $1.6 billion beat the Zacks Consensus Estimate of $1.42 billion. Also, the top line jumped 24% year over year. Foreign currency translation favorably impacted the top line by 3%.
Total expenses were $747 million, up 7% from the prior-year quarter. Also, foreign currency translation negatively impacted operating expenses by 3%.
Adjusted operating income of $914 million surged 41%. Adjusted operating margin was 57.1%, up from 50.3% a year ago.
Robust Segment Performance
Moody’s Investors Service revenues soared 30% year over year to $1 billion. Foreign currency translation favorably impacted the segment’s revenues by 3%.
Corporate finance revenues increased, driven by solid leveraged loan and speculative grade bond activity in the United States and EMEA. Also, financial institutions’ revenues grew, primarily backed by favorable mix of infrequent U.S. securities firms and insurance companies.
Further, public, project and infrastructure finance revenues rose from the year-ago level, reflecting refinancing in the utilities sector. Moreover, structured finance revenues were up mainly driven by significant increase in collateralized loan obligation refinancing activity and commercial mortgage-backed securities issuance.
Moody’s Analytics revenues grew 14% year over year to $564 million. Foreign currency translation favorably impacted the segment’s revenues by 4%.
The segment recorded growth in research, data and analytics revenues, as well as Enterprise Risk Solutions revenues.
Strong Balance Sheet
As of Mar 31, 2021, Moody’s had total cash, cash equivalents and short-term investments of $2.9 billion, up from $2.7 billion on Dec 31, 2020. Further, it had $6.3 billion of outstanding debt and $1 billion in additional borrowing capacity under the revolving credit facility.
Share Repurchase Update
During the quarter, Moody's repurchased 0.5 million shares for $132 million.
Upbeat 2021 Guidance
Following solid first-quarter 2021 performance, Moody’s raised full-year guidance. The company now expects adjusted earnings in the range of $11.00-$11.30 per share, up from prior expectation of $10.30-$10.70 per share.
On GAAP basis, earnings are now projected within $10.40-$10.70 per share. Earlier, the company had expected GAAP earnings in the range of $9.70-$10.10 per share.
Moody’s projects revenues to increase in the high-single-digit percent range, up from the prior anticipation of growth in the mid-single-digit percent range.
The company projects operating expenses to increase in the mid-single-digit percent range.
Net interest expenses are expected to be in the range of $160-$180 million, down from prior guidance of $190-$210 million.
Adjusted operating margin is expected to be roughly 50%, a change from 49-50% range provided earlier. Also, operating margin is now likely to be nearly 46%, up from previous target of approximately 45%.
Moody’s expects cash flow from operations to be $2.2-$2.3 billion and free cash flow of $2.1-$2.2 billion.
The company will likely repurchase shares worth $1.5 billion.
Effective tax rate is likely to be 20-22%.
Segment Outlook for 2021
MIS segment revenues are likely to increase in the mid-single-digit percent range, a change from prior guidance of remaining flat year over year. Adjusted operating margin is now expected to be approximately 61%, a rise from previous outlook of roughly 60%.
Coming to the MA segment, Moody’s anticipates revenues to grow in the low-double-digit percent range. Adjusted operating margin is expected to be 30%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Moody's has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise Moody's has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.