Back to top

Image: Shutterstock

Weakness in Bond Issuances to Hurt Moody's (MCO) Q1 Earnings

Read MoreHide Full Article

Moody's (MCO - Free Report) is scheduled to report first-quarter 2022 results on May 2, 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 witnessed dismal revenue performance in the to-be-reported quarter.

While lower interest rates continued to support debt issuances, geopolitical tension and macroeconomic conditions led to heightened market volatility and resulted in overall lower issuance volume in the quarter. During Investor Day on Mar 10, management provided dismal rated issuance guidance. The company anticipates issuances to “contract by up to 40%” year over year.

Global high-yield corporate bond issuances, investment-grade bond issuances and leveraged loan volumes recorded a year-over-year decline. The Zacks Consensus Estimate for revenues from the Corporate Finance line of $403 million indicates a 33.4% decline from the prior-year quarter’s reported number.

Financial institution issuance activity remains solid in the quarter under review. The consensus estimate for revenues for the Financial Institutions business line of $160 million implies a 1.2% decline. The Zacks Consensus Estimate for Public, Project and Infrastructure Finance business of $115 million suggests a 19.6% year-over-year decrease.

On the other hand, quarterly issuance volumes for residential mortgage-backed securities, asset-backed securities and collateral debt obligations were decent. Thus, growth in Structured Finance revenues is likely to have been impressive. The consensus estimate for the same stands at $128 million, suggesting a 10.3% rise.

During Investor Day, the company projected revenues for the MIS division to decline approximately 30% year over year.

Other Major 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. The company’s efforts to strengthen the division’s profitability through inorganic growth strategies are anticipated to have offered some support. Thus, the division’s overall revenues are expected to have risen in the to-be-reported quarter.

High Expenses: Given Moody’s inorganic growth efforts, charges related to strategic acquisitions and restructuring costs are expected to have increased in the to-be-reported quarter. Hence, overall expenses are likely to have been elevated.

Earnings Whispers

Our quantitative model indicates that the chances of an earnings beat for Moody’s in the first quarter are low. This is because it doesn’t have 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: The Earnings ESP for Moody’s is -0.54%.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).
 

Moody's Corporation Price and EPS Surprise

Moody's Corporation Price and EPS Surprise

Moody's Corporation price-eps-surprise | Moody's Corporation Quote

The Zacks Consensus Estimate for the company’s first-quarter earnings is pegged at $2.91, which has moved 2.3% lower over the past seven days. The figure indicates a decline of 28.3% from the year-ago reported number.

Management expects quarterly adjusted earnings to be in the range of $2.50-$3.00 per share.

The consensus estimate for sales of $1.51 billion suggests a 5.7% year-over-year fall.

Finance Stocks Worth a Look

Here are a couple of 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:

MVB Financial Corp. (MVBF - Free Report) is expected to release first-quarter 2022 earnings on May 2. The company, which sports a Zacks Rank #1 at present, has an Earnings ESP of +25.33%. You can see the complete list of today’s Zacks #1 Rank stocks here.

MVBF’s quarterly earnings estimates have moved 35.7% upward over the past month.

Fidelity National Information Services (FIS - Free Report) is slated to announce first-quarter 2022 results on May 4. The company currently carries a Zacks Rank #3 and has an Earnings ESP of +0.12%.

FIS’ earnings estimates for the to-be-reported quarter have remained unchanged over the 30 days.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


In-Depth Zacks Research for the Tickers Above


One ticker, your choice, absolutely free ($25 value):


Moody's Corporation (MCO) - free report >>

Fidelity National Information Services, Inc. (FIS) - free report >>

Mvb Financial Corp. (MVBF) - free report >>

Published in