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Moody's (MCO) Tanks on Q2 Earnings Miss, Lower 2022 Outlook
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Moody's (MCO - Free Report) reported second-quarter 2022 adjusted earnings of $2.22 per share, which lagged the Zacks Consensus Estimate of $2.41. The bottom line also plunged 31% from the year-ago quarter figure.
Shares of the company have lost almost 6.1% in pre-market trading. This is largely owing to disappointing quarterly performance. The company lowered 2022 guidance, which also weighed on investor sentiments.
Subdued issuance volume was a major headwind, which hurt Moody’s results. A rise in operating expenses posed an undermining factor. However, strategic buyouts strengthened Moody’s Analytics segment’s performance. The company’s liquidity position was robust during the quarter.
After taking into consideration certain non-recurring items, net income attributable to Moody's Corporation was $327 million or $1.77 per share, down from $577 million or $3.07 per share in the prior-year quarter.
Revenues Down, Costs Up
Revenues were $1.38 billion, which missed the Zacks Consensus Estimate of $1.44 billion. The top line declined 11% year over year. Foreign currency translation unfavorably impacted revenues by 3%.
Total expenses were $873 million, up 16%. The rise was mainly due to operational and transaction-related costs related to the recent acquisitions. Foreign currency translation positively impacted operating expenses by 4%.
Adjusted operating income of $620 million was down 28%. Adjusted operating margin was 44.9%, down from 55.4% a year ago.
Mixed Segment Performance
Moody’s Investors Service revenues decreased 28% year over year to $706 million. The fall was mainly due to volatile market conditions, rising yields and lower opportunistic refinancing, which adversely impacted issuances in all asset classes. Foreign currency translation adversely affected the segment’s revenues by 2%.
Moody’s Analytics revenues grew 18% to $675 million. This was mainly driven by the RMS acquisition and steady demand for Know Your Customer solutions and credit research. Foreign currency translation unfavorably impacted the segment’s revenues by 5%.
Strong Balance Sheet
As of Jun 30, 2022, Moody’s had total cash, cash equivalents and short-term investments of $1.7 billion, down from $1.9 billion as of Dec 31, 2021.
The company had $7.7 billion of outstanding debt and $1.25 billion in additional borrowing capacity under the revolving credit facility.
Share Repurchase Update
During the quarter, Moody's repurchased shares worth $213 million. As of Jun 30, 2022, it had nearly $960 million worth of share repurchase authorization left.
2022 Guidance Lowered
Moody’s lowered its earnings guidance on weak year-to-date performance and expects “continued cyclical market disruption.” The company expects adjusted earnings in the range of $9.20-$9.70 per share, down from the prior outlook of $10.75-$11.25 per share.
On a GAAP basis, earnings are now projected within $8.10-$8.60 per share, lower than the earlier range of $9.85-$10.35 per share.
Moody’s projects revenues to decrease in the high-single-digit percent range, a change from the earlier estimation of remaining relatively stable.
Our Take
Moody’s remains well-positioned for growth on the back of a solid market position, strength in diverse operations and strategic acquisitions. However, steadily increasing operating expenses as well as geopolitical and macroeconomic concerns are likely to hurt its financials.
Moody's Corporation Price, Consensus and EPS Surprise
Earnings Dates & Expectations of Other Finance Stocks
Hercules Capital, Inc. (HTGC - Free Report) is scheduled to announce quarterly numbers on Jul 28.
Over the past 30 days, the Zacks Consensus Estimate for Hercules Capital has been unchanged at 33 cents. This indicates a rise of 3.1% from the prior-year quarter reported number.
Credit Acceptance Corporation (CACC - Free Report) is scheduled to announce quarterly numbers on Aug 1.
Over the past 30 days, the Zacks Consensus Estimate for CACC’s quarterly earnings has remained unchanged at $13.09, suggesting a 23.8% decrease from the prior-year reported number.
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Moody's (MCO) Tanks on Q2 Earnings Miss, Lower 2022 Outlook
Moody's (MCO - Free Report) reported second-quarter 2022 adjusted earnings of $2.22 per share, which lagged the Zacks Consensus Estimate of $2.41. The bottom line also plunged 31% from the year-ago quarter figure.
Shares of the company have lost almost 6.1% in pre-market trading. This is largely owing to disappointing quarterly performance. The company lowered 2022 guidance, which also weighed on investor sentiments.
Subdued issuance volume was a major headwind, which hurt Moody’s results. A rise in operating expenses posed an undermining factor. However, strategic buyouts strengthened Moody’s Analytics segment’s performance. The company’s liquidity position was robust during the quarter.
After taking into consideration certain non-recurring items, net income attributable to Moody's Corporation was $327 million or $1.77 per share, down from $577 million or $3.07 per share in the prior-year quarter.
Revenues Down, Costs Up
Revenues were $1.38 billion, which missed the Zacks Consensus Estimate of $1.44 billion. The top line declined 11% year over year. Foreign currency translation unfavorably impacted revenues by 3%.
Total expenses were $873 million, up 16%. The rise was mainly due to operational and transaction-related costs related to the recent acquisitions. Foreign currency translation positively impacted operating expenses by 4%.
Adjusted operating income of $620 million was down 28%. Adjusted operating margin was 44.9%, down from 55.4% a year ago.
Mixed Segment Performance
Moody’s Investors Service revenues decreased 28% year over year to $706 million. The fall was mainly due to volatile market conditions, rising yields and lower opportunistic refinancing, which adversely impacted issuances in all asset classes. Foreign currency translation adversely affected the segment’s revenues by 2%.
Moody’s Analytics revenues grew 18% to $675 million. This was mainly driven by the RMS acquisition and steady demand for Know Your Customer solutions and credit research. Foreign currency translation unfavorably impacted the segment’s revenues by 5%.
Strong Balance Sheet
As of Jun 30, 2022, Moody’s had total cash, cash equivalents and short-term investments of $1.7 billion, down from $1.9 billion as of Dec 31, 2021.
The company had $7.7 billion of outstanding debt and $1.25 billion in additional borrowing capacity under the revolving credit facility.
Share Repurchase Update
During the quarter, Moody's repurchased shares worth $213 million. As of Jun 30, 2022, it had nearly $960 million worth of share repurchase authorization left.
2022 Guidance Lowered
Moody’s lowered its earnings guidance on weak year-to-date performance and expects “continued cyclical market disruption.” The company expects adjusted earnings in the range of $9.20-$9.70 per share, down from the prior outlook of $10.75-$11.25 per share.
On a GAAP basis, earnings are now projected within $8.10-$8.60 per share, lower than the earlier range of $9.85-$10.35 per share.
Moody’s projects revenues to decrease in the high-single-digit percent range, a change from the earlier estimation of remaining relatively stable.
Our Take
Moody’s remains well-positioned for growth on the back of a solid market position, strength in diverse operations and strategic acquisitions. However, steadily increasing operating expenses as well as geopolitical and macroeconomic concerns are likely to hurt its financials.
Moody's Corporation Price, Consensus and EPS Surprise
Moody's Corporation price-consensus-eps-surprise-chart | Moody's Corporation Quote
Currently, Moody’s carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Dates & Expectations of Other Finance Stocks
Hercules Capital, Inc. (HTGC - Free Report) is scheduled to announce quarterly numbers on Jul 28.
Over the past 30 days, the Zacks Consensus Estimate for Hercules Capital has been unchanged at 33 cents. This indicates a rise of 3.1% from the prior-year quarter reported number.
Credit Acceptance Corporation (CACC - Free Report) is scheduled to announce quarterly numbers on Aug 1.
Over the past 30 days, the Zacks Consensus Estimate for CACC’s quarterly earnings has remained unchanged at $13.09, suggesting a 23.8% decrease from the prior-year reported number.