We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Moody's (MCO) Down 0.5% Since Last Earnings Report: Can It Rebound?
Read MoreHide Full Article
A month has gone by since the last earnings report for Moody's (MCO - Free Report) . Shares have lost about 0.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Moody's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Moody's reported second-quarter 2021 adjusted earnings of $3.22 per share, which easily outpaced the Zacks Consensus Estimate of $2.76. The bottom line grew 15% from the year-ago quarter.
Results benefited from decent bond issuance volume, which led to revenue growth. The company’s liquidity position was robust during the quarter. However, higher operating expenses acted as headwind.
After taking into consideration certain non-recurring items, net income attributable to Moody's Corporation was $577 million or $3.07 per share, up from $509 million or $2.69 per share in the prior-year quarter.
Revenues Improve, Costs Up
Revenues of $1.55 billion beat the Zacks Consensus Estimate of $1.49 billion. The top line grew 8% year over year. Foreign currency translation favorably impacted the top line by 3%.
Total expenses were $752 million, up 4% from the prior-year quarter. Foreign currency translation negatively impacted operating expenses by 3%.
Adjusted operating income of $861 million rose 12%. Adjusted operating margin was 55.4%, up from 53.4% a year ago.
Decent Segment Performance
Moody’s Investors Service revenues increased 4% year over year to $980 million. Foreign currency translation favorably impacted the segment’s revenues by 2%.
Corporate finance revenues declined, given the fall in global investment grade activity. Financial institutions’ revenues grew as infrequent EMEA bank issuers took advantage of low interest rates and tight spreads in order to refinance existing debt.
Public, project and infrastructure finance revenues fell from the year-ago level, given a reduction in U.S. infrastructure supply. Structured finance revenues were up, mainly driven by significant increase in collateralized loan obligation refinancing activity and commercial mortgage-backed securities issuance.
Moody’s Analytics revenues grew 15% year over year to $573 million. Foreign currency translation favorably impacted the segment’s revenues by 5%.
The segment recorded growth in research, data and analytics revenues, as well as Enterprise Risk Solutions revenues.
Strong Balance Sheet
As of Jun 30, 2021, Moody’s had total cash, cash equivalents and short-term investments of $2.9 billion, up from $2.7 billion on Dec 31, 2020. The company had $6.4 billion of outstanding debt and $1 billion in additional borrowing capacity under the revolving credit facility.
Share Repurchase Update
During the quarter, Moody's repurchased 1.1 million shares for $371 million.
2021 Guidance
Following solid first-half 2021 performance and consequent to announcement of proposed RMS acquisition deal, Moody’s 2021 GAAP EPS is now projected to be $10.90-$11.20, while earlier it was estimated to be in the $10.95-$11.25 range. Adjusted EPS outlook remains in the range of $11.55-$11.85.
Moody’s projects revenues to increase in the low-double-digit percent range. The company projects operating expenses to increase roughly 10%, up from earlier guidance of rise in the mid-single-digit percent range.
Net interest expenses are expected to be in the range of $160-$180 million.
Adjusted operating margin is expected to be roughly 50%. Also, operating margin is now likely to be nearly 45-46%.
Moody’s expects cash flow from operations to be $2.3-$2.4 billion and free cash flow of $2.2-$2.3 billion.
The company will likely repurchase shares worth $750 million, down from $1.5 billion as previously guided.
Effective tax rate is likely to be 20-22%.
Segment Outlook for 2021
MIS segment revenues are likely to grow in the high-single-digit percent range, a change from prior guidance of increase in the mid-single-digit percent range. Adjusted operating margin is now expected to be approximately 61%.
Coming to the MA segment, Moody’s anticipates revenues to grow in the low-double-digit percent range. Adjusted operating margin is expected to be 30-31%, a change from prior outlook of nearly 30%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Moody's has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Moody's has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Moody's (MCO) Down 0.5% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Moody's (MCO - Free Report) . Shares have lost about 0.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Moody's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Moody's Beats Q2 Earnings Estimates, Revenues Rise Y/Y
Moody's reported second-quarter 2021 adjusted earnings of $3.22 per share, which easily outpaced the Zacks Consensus Estimate of $2.76. The bottom line grew 15% from the year-ago quarter.
Results benefited from decent bond issuance volume, which led to revenue growth. The company’s liquidity position was robust during the quarter. However, higher operating expenses acted as headwind.
After taking into consideration certain non-recurring items, net income attributable to Moody's Corporation was $577 million or $3.07 per share, up from $509 million or $2.69 per share in the prior-year quarter.
Revenues Improve, Costs Up
Revenues of $1.55 billion beat the Zacks Consensus Estimate of $1.49 billion. The top line grew 8% year over year. Foreign currency translation favorably impacted the top line by 3%.
Total expenses were $752 million, up 4% from the prior-year quarter. Foreign currency translation negatively impacted operating expenses by 3%.
Adjusted operating income of $861 million rose 12%. Adjusted operating margin was 55.4%, up from 53.4% a year ago.
Decent Segment Performance
Moody’s Investors Service revenues increased 4% year over year to $980 million. Foreign currency translation favorably impacted the segment’s revenues by 2%.
Corporate finance revenues declined, given the fall in global investment grade activity. Financial institutions’ revenues grew as infrequent EMEA bank issuers took advantage of low interest rates and tight spreads in order to refinance existing debt.
Public, project and infrastructure finance revenues fell from the year-ago level, given a reduction in U.S. infrastructure supply. Structured finance revenues were up, mainly driven by significant increase in collateralized loan obligation refinancing activity and commercial mortgage-backed securities issuance.
Moody’s Analytics revenues grew 15% year over year to $573 million. Foreign currency translation favorably impacted the segment’s revenues by 5%.
The segment recorded growth in research, data and analytics revenues, as well as Enterprise Risk Solutions revenues.
Strong Balance Sheet
As of Jun 30, 2021, Moody’s had total cash, cash equivalents and short-term investments of $2.9 billion, up from $2.7 billion on Dec 31, 2020. The company had $6.4 billion of outstanding debt and $1 billion in additional borrowing capacity under the revolving credit facility.
Share Repurchase Update
During the quarter, Moody's repurchased 1.1 million shares for $371 million.
2021 Guidance
Following solid first-half 2021 performance and consequent to announcement of proposed RMS acquisition deal, Moody’s 2021 GAAP EPS is now projected to be $10.90-$11.20, while earlier it was estimated to be in the $10.95-$11.25 range. Adjusted EPS outlook remains in the range of $11.55-$11.85.
Moody’s projects revenues to increase in the low-double-digit percent range. The company projects operating expenses to increase roughly 10%, up from earlier guidance of rise in the mid-single-digit percent range.
Net interest expenses are expected to be in the range of $160-$180 million.
Adjusted operating margin is expected to be roughly 50%. Also, operating margin is now likely to be nearly 45-46%.
Moody’s expects cash flow from operations to be $2.3-$2.4 billion and free cash flow of $2.2-$2.3 billion.
The company will likely repurchase shares worth $750 million, down from $1.5 billion as previously guided.
Effective tax rate is likely to be 20-22%.
Segment Outlook for 2021
MIS segment revenues are likely to grow in the high-single-digit percent range, a change from prior guidance of increase in the mid-single-digit percent range. Adjusted operating margin is now expected to be approximately 61%.
Coming to the MA segment, Moody’s anticipates revenues to grow in the low-double-digit percent range. Adjusted operating margin is expected to be 30-31%, a change from prior outlook of nearly 30%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Moody's has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Moody's has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.