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Moody's (MCO) Beats on Q1 Earnings, Provides Upbeat Guidance
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Moody's Corporation (MCO - Free Report) reported first-quarter 2017 adjusted earnings of $1.47 per share, which handily outpaced the Zacks Consensus Estimate of $1.23. Also, the bottom line improved 58.1% from the year-ago quarter.
Shares of Moody’s rose nearly 3.4% in the pre-market trading. Notably, the price reaction during the full trading session will provide a better idea about how the investors accepted the results.
Better-than-expected results were driven by impressive revenue growth, reflecting strong issuance in the quarter. Further, both Moody’s Investors Service and Moody’s Analytics segments recorded improved performance. However, an increase in expenses was on the downside.
Including non-cash, non-taxable gains from a strategic realignment and expansion involving Moody’s China affiliate China Cheng Xin International Credit Rating Co. Ltd. (CCXI Gain), net income attributable to Moody's was $345.6 million or $1.78 per share.
Revenues Increase, Costs Rise
Revenues of $975.2 million beat Zacks Consensus Estimate of $911.1 million. Also, revenues grew 19.5% year over year. The quarter witnessed higher domestic and international revenues. The impact of foreign currency translation was insignificant.
Total expenses were $531.8 million, up 3.9% from the prior-year quarter. A rise in operating expenses, and depreciation and amortization costs were partially offset by a decline in selling, general and administrative expenses.
Adjusted operating income of $475.9 million jumped 42.5% year over year. Adjusted operating margin came in at 48.8%, up from 40.9% in the year-ago quarter.
Segment Performance Improves
Moody’s Investors Service revenues jumped 27.3% year over year to $668.2 million driven by growth in U.S. revenues as well as international revenues.
Strong global leveraged finance issuance led to growth in global corporate finance revenues. Also, global structured finance revenues witnessed a rise mainly driven by increased issuance of U.S. CLOs and ABS.
Further, driven by non-U.S. infrastructure issuance, the company recorded increase in global public, project and infrastructure finance revenues. Moreover, global financial institutions revenues improved, primarily reflecting rise in issuance from infrequent issuers.
Moody’s Analytics revenues grew 5.5% year over year to $307 million, mainly due to higher U.S. revenues and international revenues. Nonetheless, foreign currency translation lowered the segment’s revenues by 1%.
The segment recorded growth in research, data and analytics revenues (up 6% year over year to $175.4 million) and Enterprise Risk Solutions revenues (up 7% year over year to $95.9 million). However, global professional services revenues declined 2% from the prior-year quarter to $35.7 million.
Strong Balance Sheet
As of Mar 31, 2017, Moody’s had total cash, cash equivalents and short-term investments of $2.3 billion, up 2% sequentially.
During the reported quarter, the company repurchased 0.5 million shares for $55 million.
Guidance
For 2017, Moody’s anticipates revenues to increase in the mid-single-digit percent range.
Operating expenses are projected to decline in the range of 25–30%. The company noted that excluding the 2016 settlement and restructuring charges, adjusted operating expenses are estimated to grow in the mid-single-digit percent range, up from prior outlook of increase in the low-single-digit percent range.
Adjusted operating margin is expected to be approximately 46%.
Earnings per share for 2017 are now projected to be $5.46 to $5.61 (up from the previous outlook of $5.15–$5.30) and includes 31 cents per share of CCXI Gain. Excluding this gain, adjusted earnings are expected to be near the upper end of the range of $5.15 to $5.30.
Our Take
Moody’s results reflect a decent performance. The company remains well positioned for growth on strong market position, strength in its diverse operations and strategic acquisitions.
Moody's Corporation Price, Consensus and EPS Surprise
Some of the finance stocks including PennantPark Investment Corporation (PNNT - Free Report) , Garrison Capital Inc. and FS Investment Corporation are scheduled to announce results on May 8, May 9 and May 10, respectively.
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Moody's (MCO) Beats on Q1 Earnings, Provides Upbeat Guidance
Moody's Corporation (MCO - Free Report) reported first-quarter 2017 adjusted earnings of $1.47 per share, which handily outpaced the Zacks Consensus Estimate of $1.23. Also, the bottom line improved 58.1% from the year-ago quarter.
Shares of Moody’s rose nearly 3.4% in the pre-market trading. Notably, the price reaction during the full trading session will provide a better idea about how the investors accepted the results.
Better-than-expected results were driven by impressive revenue growth, reflecting strong issuance in the quarter. Further, both Moody’s Investors Service and Moody’s Analytics segments recorded improved performance. However, an increase in expenses was on the downside.
Including non-cash, non-taxable gains from a strategic realignment and expansion involving Moody’s China affiliate China Cheng Xin International Credit Rating Co. Ltd. (CCXI Gain), net income attributable to Moody's was $345.6 million or $1.78 per share.
Revenues Increase, Costs Rise
Revenues of $975.2 million beat Zacks Consensus Estimate of $911.1 million. Also, revenues grew 19.5% year over year. The quarter witnessed higher domestic and international revenues. The impact of foreign currency translation was insignificant.
Total expenses were $531.8 million, up 3.9% from the prior-year quarter. A rise in operating expenses, and depreciation and amortization costs were partially offset by a decline in selling, general and administrative expenses.
Adjusted operating income of $475.9 million jumped 42.5% year over year. Adjusted operating margin came in at 48.8%, up from 40.9% in the year-ago quarter.
Segment Performance Improves
Moody’s Investors Service revenues jumped 27.3% year over year to $668.2 million driven by growth in U.S. revenues as well as international revenues.
Strong global leveraged finance issuance led to growth in global corporate finance revenues. Also, global structured finance revenues witnessed a rise mainly driven by increased issuance of U.S. CLOs and ABS.
Further, driven by non-U.S. infrastructure issuance, the company recorded increase in global public, project and infrastructure finance revenues. Moreover, global financial institutions revenues improved, primarily reflecting rise in issuance from infrequent issuers.
Moody’s Analytics revenues grew 5.5% year over year to $307 million, mainly due to higher U.S. revenues and international revenues. Nonetheless, foreign currency translation lowered the segment’s revenues by 1%.
The segment recorded growth in research, data and analytics revenues (up 6% year over year to $175.4 million) and Enterprise Risk Solutions revenues (up 7% year over year to $95.9 million). However, global professional services revenues declined 2% from the prior-year quarter to $35.7 million.
Strong Balance Sheet
As of Mar 31, 2017, Moody’s had total cash, cash equivalents and short-term investments of $2.3 billion, up 2% sequentially.
During the reported quarter, the company repurchased 0.5 million shares for $55 million.
Guidance
For 2017, Moody’s anticipates revenues to increase in the mid-single-digit percent range.
Operating expenses are projected to decline in the range of 25–30%. The company noted that excluding the 2016 settlement and restructuring charges, adjusted operating expenses are estimated to grow in the mid-single-digit percent range, up from prior outlook of increase in the low-single-digit percent range.
Adjusted operating margin is expected to be approximately 46%.
Earnings per share for 2017 are now projected to be $5.46 to $5.61 (up from the previous outlook of $5.15–$5.30) and includes 31 cents per share of CCXI Gain. Excluding this gain, adjusted earnings are expected to be near the upper end of the range of $5.15 to $5.30.
Our Take
Moody’s results reflect a decent performance. The company remains well positioned for growth on strong market position, strength in its diverse operations and strategic acquisitions.
Moody's Corporation Price, Consensus and EPS Surprise
Moody's Corporation Price, Consensus and EPS Surprise | Moody's Corporation Quote
Currently, Moody’s has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some of the finance stocks including PennantPark Investment Corporation (PNNT - Free Report) , Garrison Capital Inc. and FS Investment Corporation are scheduled to announce results on May 8, May 9 and May 10, respectively.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>