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Moody's (MCO - Free Report) reported third-quarter 2021 adjusted earnings of $2.69 per share, which outpaced the Zacks Consensus Estimate of $2.54. The bottom line matched the year-ago quarter figure.
Results benefited from a decent bond issuance volume and strategic buyouts, which led to revenue growth. The company’s liquidity position was robust during the quarter. However, higher operating expenses posed an undermining factor.
After taking into consideration certain non-recurring items, net income attributable to Moody's Corporation was $474 million or $2.53 per share, up from $467 million or $2.47 per share in the prior-year quarter.
Revenues Improve, Costs Up
Revenues of $1.53 billion beat the Zacks Consensus Estimate of $1.46 billion. The top line grew 13% year over year. Foreign currency translation favorably impacted the top line by 1%.
Total expenses were $850 million, up 19% from the prior-year quarter. The rise was mainly due to operational and transaction-related costs related to the recent acquisitions. Foreign currency translation negatively impacted operating expenses by 1%.
Adjusted operating income of $737 million was up 2%. Adjusted operating margin was 48.3%, down from 53.2% a year ago.
Solid Segment Performance
Moody’s Investors Service revenues increased 12% year over year to $925 million. Foreign currency translation’s impact on the segment’s revenues was negligible.
Corporate finance revenues rose, given the increase in U.S. leveraged loans for both M&A transactions and higher refinancing activity. Financial institutions’ revenues grew as bank and insurance issuers took advantage of the low interest rates and tight spreads in order to refinance the existing debt.
Structured finance revenues were up, mainly driven by a significant increase in collateralized loan obligation refinancing activity, and commercial and residential mortgage-backed securities issuance. Public, project and infrastructure finance revenues fell from the year-ago level, given a reduction in U.S. infrastructure supply.
Moody’s Analytics revenues grew 13% to $601 million. Foreign currency translation favorably impacted the segment’s revenues by 1%.
The segment recorded growth in research, data and analytics revenues, as well as Enterprise Risk Solutions revenues.
Strong Balance Sheet
As of Sep 30, 2021, Moody’s had total cash, cash equivalents, and short-term investments of $2.3 billion, down from $2.7 billion on Dec 31, 2020. The company had $7.5 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 0.33 million shares for $125 million.
Upbeat 2021 Guidance
Following a robust performance in the first three quarters of 2021, Moody’s raised full-year guidance.
The company now expects adjusted earnings in the range of $12.15-$12.35 per share, up from prior expectation of $11.55-$11.85. The Zacks Consensus Estimate for the bottom line for 2021 is $11.93, which is below the company’s adjusted earnings guidance.
On a GAAP basis, earnings are now projected within $11.65-$11.85 per share. Earlier, the company had expected GAAP earnings in the range of $10.95-$11.25 per share.
Moody’s projects revenues to increase in the low-teens percent range, up from the prior anticipation of growth in the low-double-digit percent range.
Our Take
Moody’s remains well-positioned for growth on the back of a solid market position, strength in diverse operations, and strategic acquisitions. However, steadily increasing operating expenses are likely to hurt its financials to some extent.
Moody's Corporation Price, Consensus and EPS Surprise
Ares Capital Corporation’s (ARCC - Free Report) third-quarter 2021 core earnings of 47 cents per share beat the Zacks Consensus Estimate of 45 cents. The bottom line reflected a rise of 20.5% from the prior-year quarter.
BankUnited, Inc.’s (BKU - Free Report) third-quarter 2021 earnings per share of 94 cents surpassed the Zacks Consensus Estimate of 88 cents. The bottom line jumped 34.3% from the prior-year quarter.
Invesco’s (IVZ - Free Report) third-quarter 2021 adjusted earnings of 77 cents per share outpaced the Zacks Consensus Estimate of 73 cents. The bottom line grew 45.3% from the prior-year quarter.
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Moody's (MCO) Beats Q3 Earnings Estimates, Raises 2021 View
Moody's (MCO - Free Report) reported third-quarter 2021 adjusted earnings of $2.69 per share, which outpaced the Zacks Consensus Estimate of $2.54. The bottom line matched the year-ago quarter figure.
Results benefited from a decent bond issuance volume and strategic buyouts, which led to revenue growth. The company’s liquidity position was robust during the quarter. However, higher operating expenses posed an undermining factor.
After taking into consideration certain non-recurring items, net income attributable to Moody's Corporation was $474 million or $2.53 per share, up from $467 million or $2.47 per share in the prior-year quarter.
Revenues Improve, Costs Up
Revenues of $1.53 billion beat the Zacks Consensus Estimate of $1.46 billion. The top line grew 13% year over year. Foreign currency translation favorably impacted the top line by 1%.
Total expenses were $850 million, up 19% from the prior-year quarter. The rise was mainly due to operational and transaction-related costs related to the recent acquisitions. Foreign currency translation negatively impacted operating expenses by 1%.
Adjusted operating income of $737 million was up 2%. Adjusted operating margin was 48.3%, down from 53.2% a year ago.
Solid Segment Performance
Moody’s Investors Service revenues increased 12% year over year to $925 million. Foreign currency translation’s impact on the segment’s revenues was negligible.
Corporate finance revenues rose, given the increase in U.S. leveraged loans for both M&A transactions and higher refinancing activity. Financial institutions’ revenues grew as bank and insurance issuers took advantage of the low interest rates and tight spreads in order to refinance the existing debt.
Structured finance revenues were up, mainly driven by a significant increase in collateralized loan obligation refinancing activity, and commercial and residential mortgage-backed securities issuance. Public, project and infrastructure finance revenues fell from the year-ago level, given a reduction in U.S. infrastructure supply.
Moody’s Analytics revenues grew 13% to $601 million. Foreign currency translation favorably impacted the segment’s revenues by 1%.
The segment recorded growth in research, data and analytics revenues, as well as Enterprise Risk Solutions revenues.
Strong Balance Sheet
As of Sep 30, 2021, Moody’s had total cash, cash equivalents, and short-term investments of $2.3 billion, down from $2.7 billion on Dec 31, 2020. The company had $7.5 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 0.33 million shares for $125 million.
Upbeat 2021 Guidance
Following a robust performance in the first three quarters of 2021, Moody’s raised full-year guidance.
The company now expects adjusted earnings in the range of $12.15-$12.35 per share, up from prior expectation of $11.55-$11.85. The Zacks Consensus Estimate for the bottom line for 2021 is $11.93, which is below the company’s adjusted earnings guidance.
On a GAAP basis, earnings are now projected within $11.65-$11.85 per share. Earlier, the company had expected GAAP earnings in the range of $10.95-$11.25 per share.
Moody’s projects revenues to increase in the low-teens percent range, up from the prior anticipation of growth in the low-double-digit percent range.
Our Take
Moody’s remains well-positioned for growth on the back of a solid market position, strength in diverse operations, and strategic acquisitions. However, steadily increasing operating expenses are likely to hurt its financials to some extent.
Moody's Corporation Price, Consensus and EPS Surprise
Moody's Corporation price-consensus-eps-surprise-chart | Moody's Corporation Quote
Currently, Moody’s carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Finance Stocks
Ares Capital Corporation’s (ARCC - Free Report) third-quarter 2021 core earnings of 47 cents per share beat the Zacks Consensus Estimate of 45 cents. The bottom line reflected a rise of 20.5% from the prior-year quarter.
BankUnited, Inc.’s (BKU - Free Report) third-quarter 2021 earnings per share of 94 cents surpassed the Zacks Consensus Estimate of 88 cents. The bottom line jumped 34.3% from the prior-year quarter.
Invesco’s (IVZ - Free Report) third-quarter 2021 adjusted earnings of 77 cents per share outpaced the Zacks Consensus Estimate of 73 cents. The bottom line grew 45.3% from the prior-year quarter.