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Will Lower Bond Issuance Hurt Moody's (MCO) Q3 Earnings?
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Moody's Corporation (MCO - Free Report) is slated to report its third-quarter 2017 results on Nov 3, before the opening bell. The company is expected to witness a fall in revenues for its Corporate Finance line, the largest revenue contributor at the Moody's Investors Service (“MIS”) division.
Backdrop for bond issuance (driven by tightening of credit spreads and a rise in long-term yield curve) during the third quarter was not much favorable. Hence, investment grade bond and leveraged loan issuances volume remained muted sequentially.
So, Corporate Finance revenues are expected to decline. The Zacks Consensus Estimate for Corporate Finance revenues of $302 million indicates a 15.2% fall from the last quarter.
Apart from this, quarterly issuance volume for commercial mortgage-backed securities, collateralized loan obligations and asset backed securities remained slow. Therefore, Moody’s will likely be hit by this trend and witness a decrease in Structured Finance revenues in the to-be-reported quarter. The Zacks Consensus Estimate for Structured Finance revenues is $110 million, reflecting a fall of 7.6% from the prior quarter.
Further, MIS division’s other revenue source — Financial Institutions — is anticipated to report $97 million of revenues, down 4.9% sequentially. On the other hand, Public, Project and Infrastructure Finance unit revenues are projected to witness a 2.9% rise from the last quarter to $108 million.
Overall, MIS division is projected to show a sequential decline in the top line. The Zacks Consensus Estimate for MIS division revenues is $623 million, reflecting a fall of 9.3% from the prior quarter.
Other Factors to Influence Q3 Results
Higher revenues from Moody's Analytics (“MA”) division: Moody’s continues to pursue growth in areas outside the core credit ratings service. Given the rise in demand for analytics, the company’s MA division is expected to show a rise in revenues. The MA division’s all three business units are anticipated to witness higher revenues in the to-be-reported quarter. Hence, the Zacks Consensus Estimate for MA division revenues of $351 million indicates an increase of 11.8% sequentially.
Strategic deals/investments to support revenues: Moody’s is likely to show revenue growth on the back of its strategic acquisitions and investments. These have increased the scale and cross-selling opportunities across products and vertical markets. However, strength of the U.S. dollar is likely to impact quarterly revenues to some extent.
Overall, Moody’s is projected to show 1.7% sequential dip in revenues, mainly owing to dismal MIS division’s performance. However, the Zacks Consensus Estimate for sales of $983.4 million reflects 7.2% year-over-year growth.
Expenses to remain high: As Moody’s continues with its inorganic growth strategy, acquisition and restructuring costs are expected to remain high. So, overall expenses are anticipated to rise during the quarter.
Now, let’s see what our quantitative model predicts.
According to our quantitative model, it cannot be conclusively predicted if Moody’s will be able to beat the Zacks Consensus Estimate this time. This is because it has Earnings ESP of 0.00% and a Zacks Rank #2 (Buy). Though a favorable Zack Rank increases the predictive power of ESP we also need a positive ESP to be confident of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Notably, the Zacks Consensus Estimate for earnings the to-be-reported quarter has been revised 4.3% upward over the last seven days to $1.44, with two out of three estimates moving up. The Zacks Consensus Estimate reflects a year-over-year improvement of 7.5%. On the other hand, on a sequential basis, earnings are projected to show a 4.6% decline.
Credicorp Ltd. (BAP - Free Report) is slated to release results on Nov 6. Its Earnings ESP is +0.19% and it carries a Zacks Rank of 3.
LendingClub Corporation (LC - Free Report) is also slated to report results on Nov 7. It has an Earnings ESP of +5.00% and a Zacks Rank #3.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
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Will Lower Bond Issuance Hurt Moody's (MCO) Q3 Earnings?
Moody's Corporation (MCO - Free Report) is slated to report its third-quarter 2017 results on Nov 3, before the opening bell. The company is expected to witness a fall in revenues for its Corporate Finance line, the largest revenue contributor at the Moody's Investors Service (“MIS”) division.
Backdrop for bond issuance (driven by tightening of credit spreads and a rise in long-term yield curve) during the third quarter was not much favorable. Hence, investment grade bond and leveraged loan issuances volume remained muted sequentially.
So, Corporate Finance revenues are expected to decline. The Zacks Consensus Estimate for Corporate Finance revenues of $302 million indicates a 15.2% fall from the last quarter.
Apart from this, quarterly issuance volume for commercial mortgage-backed securities, collateralized loan obligations and asset backed securities remained slow. Therefore, Moody’s will likely be hit by this trend and witness a decrease in Structured Finance revenues in the to-be-reported quarter. The Zacks Consensus Estimate for Structured Finance revenues is $110 million, reflecting a fall of 7.6% from the prior quarter.
Further, MIS division’s other revenue source — Financial Institutions — is anticipated to report $97 million of revenues, down 4.9% sequentially. On the other hand, Public, Project and Infrastructure Finance unit revenues are projected to witness a 2.9% rise from the last quarter to $108 million.
Overall, MIS division is projected to show a sequential decline in the top line. The Zacks Consensus Estimate for MIS division revenues is $623 million, reflecting a fall of 9.3% from the prior quarter.
Other Factors to Influence Q3 Results
Higher revenues from Moody's Analytics (“MA”) division: Moody’s continues to pursue growth in areas outside the core credit ratings service. Given the rise in demand for analytics, the company’s MA division is expected to show a rise in revenues. The MA division’s all three business units are anticipated to witness higher revenues in the to-be-reported quarter. Hence, the Zacks Consensus Estimate for MA division revenues of $351 million indicates an increase of 11.8% sequentially.
Strategic deals/investments to support revenues: Moody’s is likely to show revenue growth on the back of its strategic acquisitions and investments. These have increased the scale and cross-selling opportunities across products and vertical markets. However, strength of the U.S. dollar is likely to impact quarterly revenues to some extent.
Overall, Moody’s is projected to show 1.7% sequential dip in revenues, mainly owing to dismal MIS division’s performance. However, the Zacks Consensus Estimate for sales of $983.4 million reflects 7.2% year-over-year growth.
Expenses to remain high: As Moody’s continues with its inorganic growth strategy, acquisition and restructuring costs are expected to remain high. So, overall expenses are anticipated to rise during the quarter.
Now, let’s see what our quantitative model predicts.
According to our quantitative model, it cannot be conclusively predicted if Moody’s will be able to beat the Zacks Consensus Estimate this time. This is because it has Earnings ESP of 0.00% and a Zacks Rank #2 (Buy). Though a favorable Zack Rank increases the predictive power of ESP we also need a positive ESP to be confident of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Notably, the Zacks Consensus Estimate for earnings the to-be-reported quarter has been revised 4.3% upward over the last seven days to $1.44, with two out of three estimates moving up. The Zacks Consensus Estimate reflects a year-over-year improvement of 7.5%. On the other hand, on a sequential basis, earnings are projected to show a 4.6% decline.
Moody's Corporation Price and EPS Surprise
Moody's Corporation Price and EPS Surprise | Moody's Corporation Quote
Stocks That Warrant a Look
Here are some finance stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.
Ellington Financial LLC (EFC - Free Report) is scheduled to report results on Nov 6. It has an Earnings ESP of +3.33% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Credicorp Ltd. (BAP - Free Report) is slated to release results on Nov 6. Its Earnings ESP is +0.19% and it carries a Zacks Rank of 3.
LendingClub Corporation (LC - Free Report) is also slated to report results on Nov 7. It has an Earnings ESP of +5.00% and a Zacks Rank #3.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>