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Solid Bond Issuance Volume to Aid Moody's (MCO) Q1 Earnings

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Moody's (MCO - Free Report) is slated to announce first-quarter 2021 results on Apr 28, 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 solid revenue growth in the quarter, owing to robust bond issuance volume.

Lower interest rates continued to support debt issuances in the to-be-reported quarter. Though investment-grade bond issuance volume was weak, leveraged loan and high-yield bond issuance volumes witnessed strong growth. Thus, revenues under the Corporate Finance line are expected to have improved. The Zacks Consensus Estimate for the same is pegged at $530 million, which indicates 17% growth from the prior-year quarter’s reported number.

Likewise, the quarterly issuance volumes for residential mortgage-backed securities and asset-backed securities were impressive, while collateral debt obligation issuances were muted. Thus, growth in Structured Finance revenues is likely to have been solid. The consensus estimate for the same stands at $105 million, suggesting 9.4% increase year over year.

Further, the consensus estimate for Financial Institutions business line of $134 million implies 7.2% growth. The Zacks Consensus Estimate for Public, Project and Infrastructure Finance business of $110 million suggests a modest rise.

Therefore, the MIS division’s top line is expected to have improved. The consensus estimate for the division’s revenues of $863 million indicates 8.7% rise.

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 first quarter. Also, the company’s efforts to strengthen the division’s profitability through inorganic growth strategies might have offered some support. Thus, the division’s overall revenues might have risen in the to-be-reported quarter.

The consensus estimate for the division’s revenues of $558 million reflects 12.5% growth from the prior-year quarter.

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.

Earnings Whispers

Our quantitative model predicts an earnings beat for Moody’s in the first quarter of 2021. 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 +2.39%.

Zacks Rank: Moody’s currently carries a Zacks Rank #3.

Moodys Corporation Price and EPS Surprise

Moodys Corporation Price and EPS Surprise

Moodys Corporation price-eps-surprise | Moodys Corporation Quote

The Zacks Consensus Estimate for the company’s earnings of $2.80 for the to-be-reported quarter has moved 7.7% upward over the past 30 days. The figure indicates a rise of 2.6% from the year-ago reported number. Also, the consensus estimate for sales of $1.42 billion suggests a 10.2% increase.

 

Other Stocks Worth a Look

Here are some other finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

The Earnings ESP for Prosperity Bancshares, Inc. (PB - Free Report) is +2.56% and it carries a Zacks Rank #3 at present. The company is slated to report quarterly numbers on Apr 28.

T. Rowe Price Group (TROW - Free Report) is scheduled to release earnings on Apr 29. The company, which carries a Zacks Rank #2 at present, has an Earnings ESP of +0.57%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Carlyle Group (CG - Free Report) is slated to report quarterly results on Apr 29. The company currently has an Earnings ESP of +1.46% and a Zacks Rank of 3.

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