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Moody's (MCO) Q3 Earnings Top Estimates, Guidance Raised
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Moody’s Corp. (MCO - Free Report) reported third-quarter 2016 results, wherein both earnings of $1.34 per share and revenues of $917.1 million beat the respective Zacks Consensus Estimate of $1.18 per share and $883.7 million.
On a year-over-year basis, earnings and revenues grew 20.7% and 9.9%, respectively. Management has raised its full year earnings outlook again driven by strong results and strict cost control measures. The company had upgraded its earnings outlook last month only. Moody’s now expects GAAP earnings per share to be in the range of $4.76 to $4.86 compared with $4.70 to $4.80 projected in Sep 2016. Excluding one-time items, earnings are expected to be in the range of $4.62 to $4.72 compared with $4.55 to $4.65 projected earlier.
Domestic revenues were up 13% year over year to $545.7 million in the reported quarter. International revenues increased 5% year over year to $371.4 million.
Segment wise, Moody’s Investors Service (MIS) revenues increased 12% year over year to $612.3 million. MIS revenues in the U.S. grew 11% to $391.3 million on a year-over-year basis while International revenues increased 13% to $221 million.
Within the MIS segment, increases in investment grade and speculative-grade bond issuance led to 21% growth in Global Corporate Finance revenues to $299.6 million. Global Financial Institutions' revenues increased 7% year over year to $95.8 million while Global Public, Project and Infrastructure Finance division revenues grew 16% year over year to $105.2 million driven by higher domestic public finance-related issuance.
However, sluggish domestic CMBS and CLO markets led to a 7% decline in Global Structured Finance revenues to $104.2 million.
Moody’s Analytics (MA) revenues grew 6% year over year to $304.8 million bolstered by growth in research, data and analytics (RD&A) revenues (up 6% year over year to $167.7 million) and Enterprise Risk Solutions (ERS) revenues (up 10% year over year to $101.5 million). However, Global Professional Services revenues fell 3% year over year to $35.6 million.
Domestic MA revenues grew 19% to $154.4 million, whereas international MA revenues declined 4% to $150.4 million.
Margins
Moody’s reported adjusted operating income of $438.6 million compared with $378 million in the year-ago quarter. Adjusted operating margin was 47.8% compared with 45.3% reported in the year-ago period.
Balance Sheet
Moody’s total cash, cash equivalents and short-term investments as of Sep 30, 2016 were $2.1 billion. Free cash flow for the first nine months of the year fell 7% to $771.8 million. The company exited the quarter with $3.4 billion of outstanding debt and $1 billion debt in its revolving credit facility.
During the quarter, the company repurchased 1.9 million shares for $193 million. This took the total count to 7.1 million shares worth $678.9 million for the first nine months of the year.
For the full year, revenues are expected to be up in low-single digits as projected earlier. Further, the company expects capital expenditure of $120 million. Free cash flow is expected to be $1 billion.
The company continues to project adjusted operating margin of 45% and expects operating expenses to increase in mid-single digits.
The Zacks Consensus Estimate for 2016 for Amazon has gone up from $5.77 to $5.86 over the last 30 days while for NetEase, it has gone up from $11.97 to $12.32 per share. For Mercadolibre, it stands at $2.79, up from $2.78 over the last 30 days.
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Moody's (MCO) Q3 Earnings Top Estimates, Guidance Raised
Moody’s Corp. (MCO - Free Report) reported third-quarter 2016 results, wherein both earnings of $1.34 per share and revenues of $917.1 million beat the respective Zacks Consensus Estimate of $1.18 per share and $883.7 million.
On a year-over-year basis, earnings and revenues grew 20.7% and 9.9%, respectively. Management has raised its full year earnings outlook again driven by strong results and strict cost control measures. The company had upgraded its earnings outlook last month only. Moody’s now expects GAAP earnings per share to be in the range of $4.76 to $4.86 compared with $4.70 to $4.80 projected in Sep 2016. Excluding one-time items, earnings are expected to be in the range of $4.62 to $4.72 compared with $4.55 to $4.65 projected earlier.
Quarterly Segment Details
Domestic revenues were up 13% year over year to $545.7 million in the reported quarter. International revenues increased 5% year over year to $371.4 million.
Segment wise, Moody’s Investors Service (MIS) revenues increased 12% year over year to $612.3 million. MIS revenues in the U.S. grew 11% to $391.3 million on a year-over-year basis while International revenues increased 13% to $221 million.
Within the MIS segment, increases in investment grade and speculative-grade bond issuance led to 21% growth in Global Corporate Finance revenues to $299.6 million. Global Financial Institutions' revenues increased 7% year over year to $95.8 million while Global Public, Project and Infrastructure Finance division revenues grew 16% year over year to $105.2 million driven by higher domestic public finance-related issuance.
However, sluggish domestic CMBS and CLO markets led to a 7% decline in Global Structured Finance revenues to $104.2 million.
Moody’s Analytics (MA) revenues grew 6% year over year to $304.8 million bolstered by growth in research, data and analytics (RD&A) revenues (up 6% year over year to $167.7 million) and Enterprise Risk Solutions (ERS) revenues (up 10% year over year to $101.5 million). However, Global Professional Services revenues fell 3% year over year to $35.6 million.
Domestic MA revenues grew 19% to $154.4 million, whereas international MA revenues declined 4% to $150.4 million.
Margins
Moody’s reported adjusted operating income of $438.6 million compared with $378 million in the year-ago quarter. Adjusted operating margin was 47.8% compared with 45.3% reported in the year-ago period.
Balance Sheet
Moody’s total cash, cash equivalents and short-term investments as of Sep 30, 2016 were $2.1 billion. Free cash flow for the first nine months of the year fell 7% to $771.8 million. The company exited the quarter with $3.4 billion of outstanding debt and $1 billion debt in its revolving credit facility.
During the quarter, the company repurchased 1.9 million shares for $193 million. This took the total count to 7.1 million shares worth $678.9 million for the first nine months of the year.
MOODYS CORP Price, Consensus and EPS Surprise
MOODYS CORP Price, Consensus and EPS Surprise | MOODYS CORP Quote
Guidance
For the full year, revenues are expected to be up in low-single digits as projected earlier. Further, the company expects capital expenditure of $120 million. Free cash flow is expected to be $1 billion.
The company continues to project adjusted operating margin of 45% and expects operating expenses to increase in mid-single digits.
Zacks Rank
Currently, Moody’s has a Zacks Rank #2 (Buy). Better-ranked stocks in the broader tech space are Amazon.com Inc (AMZN - Free Report) , NetEase, Inc. (NTES - Free Report) and Mercadolibre, Inc. (MELI - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2016 for Amazon has gone up from $5.77 to $5.86 over the last 30 days while for NetEase, it has gone up from $11.97 to $12.32 per share. For Mercadolibre, it stands at $2.79, up from $2.78 over the last 30 days.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>