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Soft Bond Issuance Volume to Hurt Moody's (MCO) Q4 Earnings
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Moody's (MCO - Free Report) is slated to announce fourth-quarter and 2020 results on Feb 12, before the opening bell.
The company’s Corporate Finance line, the largest revenue contributor at the Moody's Investors Service (“MIS”) division, is likely to have recorded weak revenue growth in the quarter, owing to muted bond issuance volume.
Though lower interest rates continued to support debt issuances in the to-be-reported quarter, overall demand was muted. During the quarter, investment-grade bond and leveraged loan issuance volumes were subdued, while high-yield bond issuance volumes witnessed modest growth. Thus, rise in revenues under the Corporate Finance line are expected to have been soft year over year.
Likewise, the quarterly issuance volumes for residential mortgage-backed securities and asset-backed securities were soft. Thus, growth in Structured Finance revenues is likely to have been weak.
Therefore, the MIS division’s top line is not expected to have received much support from Corporate Finance and Structured Finance lines of businesses.
For 2020, the company expects MIS division revenues to grow in the low-double-digit percentage range as its global rated issuance will increase in the high-teens percentage range.
Other Factors at Play
Support From Moody's Analytics (“MA”) Division: With demand for analytics rising, revenues from all units at the MA division are expected to have increased in the fourth quarter. Also, the company’s efforts to strengthen the division’s profitability through inorganic growth initiatives might have offered some support. Thus, the division’s overall revenues might have risen in the to-be-reported quarter.
Management anticipates MA division revenues for 2020 to grow in the mid-single-digit percentage range.
High Expenses: Given Moody’s inorganic growth efforts, charges related to strategic acquisition and restructuring costs might have increased in the to-be-reported quarter. Hence, overall expenses are likely to have been elevated.
The company has been undertaking a restructuring program with aim of rationalizing and exiting certain real estate leases. Thus, Moody’s expects it to result in total pre-tax charges of $25-$35 million in second-half 2020 and annualized savings of $5-$6 million.
For 2020, the company expects operating expenses to rise in the low-single-digit percentage range.
Q4 Earnings & Sales Growth Expectations
The Zacks Consensus Estimate for the company’s earnings of $1.97 for the to-be-reported quarter has moved 1.5% upward over the past 30 days. The figure indicates a fall of 1.5% from the year-ago reported number.
The consensus estimate for sales of $1.22 billion suggests a 1.2% decline.
2020 Management Outlook
Given its impressive performance till the third quarter of 2020, Moody’s had raised 2020 earnings guidance. The company expects adjusted earnings in the range of $9.30-$9.50 per share (up from the prior expectation of $8.80-$9.20). The consensus estimate of $10.19 indicates year-over-year growth of 22.9%.
On GAAP basis, earnings are expected within $9.95-$10.15 per share, up from the earlier guided range of $8.15-$8.55.
Moody’s projects revenues to increase in the high-single-digit percentage range. The Zacks Consensus Estimate for sales of $5.31 billion suggests 9.9% rise.
Earnings Whispers
Our quantitative model predicts an earnings beat for Moody’s in the fourth quarter of 2020. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP for Moody’s is +4.14%.
Zacks Rank: Moody’s currently carries a Zacks Rank #3.
Here are a few other finance stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in their upcoming releases.
The Earnings ESP for Ellington Financial Inc. (EFC - Free Report) is +5.00% and the company carries a Zacks Rank of 2 (Buy) at present. It is slated to report quarterly results on Feb 18.
The Earnings ESP for Canadian Imperial Bank of Commerce (CM - Free Report) is +0.82% and it carries a Zacks Rank #2, currently. The company is slated to announce quarterly numbers on Feb 25.
+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities
In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.
Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.
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Soft Bond Issuance Volume to Hurt Moody's (MCO) Q4 Earnings
Moody's (MCO - Free Report) is slated to announce fourth-quarter and 2020 results on Feb 12, before the opening bell.
The company’s Corporate Finance line, the largest revenue contributor at the Moody's Investors Service (“MIS”) division, is likely to have recorded weak revenue growth in the quarter, owing to muted bond issuance volume.
Though lower interest rates continued to support debt issuances in the to-be-reported quarter, overall demand was muted. During the quarter, investment-grade bond and leveraged loan issuance volumes were subdued, while high-yield bond issuance volumes witnessed modest growth. Thus, rise in revenues under the Corporate Finance line are expected to have been soft year over year.
Likewise, the quarterly issuance volumes for residential mortgage-backed securities and asset-backed securities were soft. Thus, growth in Structured Finance revenues is likely to have been weak.
Therefore, the MIS division’s top line is not expected to have received much support from Corporate Finance and Structured Finance lines of businesses.
For 2020, the company expects MIS division revenues to grow in the low-double-digit percentage range as its global rated issuance will increase in the high-teens percentage range.
Other Factors at Play
Support From Moody's Analytics (“MA”) Division: With demand for analytics rising, revenues from all units at the MA division are expected to have increased in the fourth quarter. Also, the company’s efforts to strengthen the division’s profitability through inorganic growth initiatives might have offered some support. Thus, the division’s overall revenues might have risen in the to-be-reported quarter.
Management anticipates MA division revenues for 2020 to grow in the mid-single-digit percentage range.
High Expenses: Given Moody’s inorganic growth efforts, charges related to strategic acquisition and restructuring costs might have increased in the to-be-reported quarter. Hence, overall expenses are likely to have been elevated.
The company has been undertaking a restructuring program with aim of rationalizing and exiting certain real estate leases. Thus, Moody’s expects it to result in total pre-tax charges of $25-$35 million in second-half 2020 and annualized savings of $5-$6 million.
For 2020, the company expects operating expenses to rise in the low-single-digit percentage range.
Q4 Earnings & Sales Growth Expectations
The Zacks Consensus Estimate for the company’s earnings of $1.97 for the to-be-reported quarter has moved 1.5% upward over the past 30 days. The figure indicates a fall of 1.5% from the year-ago reported number.
The consensus estimate for sales of $1.22 billion suggests a 1.2% decline.
2020 Management Outlook
Given its impressive performance till the third quarter of 2020, Moody’s had raised 2020 earnings guidance. The company expects adjusted earnings in the range of $9.30-$9.50 per share (up from the prior expectation of $8.80-$9.20). The consensus estimate of $10.19 indicates year-over-year growth of 22.9%.
On GAAP basis, earnings are expected within $9.95-$10.15 per share, up from the earlier guided range of $8.15-$8.55.
Moody’s projects revenues to increase in the high-single-digit percentage range. The Zacks Consensus Estimate for sales of $5.31 billion suggests 9.9% rise.
Earnings Whispers
Our quantitative model predicts an earnings beat for Moody’s in the fourth quarter of 2020. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP for Moody’s is +4.14%.
Zacks Rank: Moody’s currently carries a Zacks Rank #3.
Moodys Corporation Price and EPS Surprise
Moodys Corporation price-eps-surprise | Moodys Corporation Quote
Other Stocks Worth a Look
Here are a few other finance stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in their upcoming releases.
The Earnings ESP for Ellington Financial Inc. (EFC - Free Report) is +5.00% and the company carries a Zacks Rank of 2 (Buy) at present. It is slated to report quarterly results on Feb 18.
Focus Financial Partners Inc. is slated to report quarterly earnings on Feb 18. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.65%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Earnings ESP for Canadian Imperial Bank of Commerce (CM - Free Report) is +0.82% and it carries a Zacks Rank #2, currently. The company is slated to announce quarterly numbers on Feb 25.
+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities
In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.
Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.
Click here to download this report FREE >>