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Slowdown in Bond Issuances to Hurt Moody's (MCO) Q2 Earnings
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Moody's (MCO - Free Report) is slated to report second-quarter 2022 results on Aug 26, 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 disappointing revenue performance in the to-be-reported quarter.
Rising interest rates, heightened market volatility due to geopolitical and macroeconomic concerns and widening credit spreads resulted in soft issuance volume across all categories of bonds in the second quarter.
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 $338 million indicates an 18.9% decline from the prior quarter’s reported number.
Financial institution issuance activity was also muted in the second quarter. The consensus estimate for revenues for the Financial Institutions business line of $126 million implies a 3.8% decline. The Zacks Consensus Estimate for Public, Project and Infrastructure Finance business of $110 million suggests a 10.6% sequential fall.
Likewise, quarterly issuance volumes for residential mortgage-backed securities, asset-backed securities and collateral debt obligations were weak. Thus, Structured Finance revenues are likely to have been adversely impacted. The consensus estimate for the same stands at $128 million, suggesting an 11.1% decrease.
Thus, The Zacks Consensus Estimate for MIS division revenues of $713 million reflects an 18% decline on a sequential basis.
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 second 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.
The consensus estimate for the MA division’s revenues is pegged at $687 million, indicating a 1.2% decrease from the prior 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 does not indicate an earnings beat for Moody’s in the second quarter. 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 — to increase the chances of an earnings beat .
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 -8.60%.
Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).
The Zacks Consensus Estimate for the company’s second-quarter earnings is pegged at $2.41, which has moved 5.1% lower over the past 30 days. The figure indicates a decline of 25.2% from the year-ago reported number.
The consensus estimate for sales of $1.44 billion suggests a 7.5% 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:
RF’s quarterly earnings estimates have moved 1.9% lower over the past seven days.
Lazard Ltd (LAZ - Free Report) is slated to announce second-quarter 2022 results on Jul 28. The company currently carries a Zacks Rank #3 and has an Earnings ESP of +2.04%.
LAZ’s earnings estimates for the to-be-reported quarter have moved 2.3% upward over the past week.
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Slowdown in Bond Issuances to Hurt Moody's (MCO) Q2 Earnings
Moody's (MCO - Free Report) is slated to report second-quarter 2022 results on Aug 26, 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 disappointing revenue performance in the to-be-reported quarter.
Rising interest rates, heightened market volatility due to geopolitical and macroeconomic concerns and widening credit spreads resulted in soft issuance volume across all categories of bonds in the second quarter.
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 $338 million indicates an 18.9% decline from the prior quarter’s reported number.
Financial institution issuance activity was also muted in the second quarter. The consensus estimate for revenues for the Financial Institutions business line of $126 million implies a 3.8% decline. The Zacks Consensus Estimate for Public, Project and Infrastructure Finance business of $110 million suggests a 10.6% sequential fall.
Likewise, quarterly issuance volumes for residential mortgage-backed securities, asset-backed securities and collateral debt obligations were weak. Thus, Structured Finance revenues are likely to have been adversely impacted. The consensus estimate for the same stands at $128 million, suggesting an 11.1% decrease.
Thus, The Zacks Consensus Estimate for MIS division revenues of $713 million reflects an 18% decline on a sequential basis.
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 second 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.
The consensus estimate for the MA division’s revenues is pegged at $687 million, indicating a 1.2% decrease from the prior 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 does not indicate an earnings beat for Moody’s in the second quarter. 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 — to increase the chances of an earnings beat .
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 -8.60%.
Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).
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 second-quarter earnings is pegged at $2.41, which has moved 5.1% lower over the past 30 days. The figure indicates a decline of 25.2% from the year-ago reported number.
The consensus estimate for sales of $1.44 billion suggests a 7.5% 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:
Regions Financial (RF - Free Report) is scheduled to release second-quarter 2022 results on Jul 22. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.89%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
RF’s quarterly earnings estimates have moved 1.9% lower over the past seven days.
Lazard Ltd (LAZ - Free Report) is slated to announce second-quarter 2022 results on Jul 28. The company currently carries a Zacks Rank #3 and has an Earnings ESP of +2.04%.
LAZ’s earnings estimates for the to-be-reported quarter have moved 2.3% upward over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.