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Here are 5 Reasons to Bet on Moody's (MCO) Stock Right Away
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Strategic buyouts and revenue diversification initiatives will support Moody’s (MCO - Free Report) . Though the operating backdrop hasn’t improved much, green shoots are visible. Further, its ongoing cost-efficiency efforts will aid the bottom line.
Moody’s is witnessing upward earnings estimate revisions, reflecting analysts’ optimism regarding its earnings growth potential. In the past 30 days, the Zacks Consensus Estimate for earnings has moved marginally and 1% upward for 2023 and 2024, respectively. MCO currently carries a Zacks Rank #2 (Buy).
So far this year, shares of Moody’s have rallied 20.1%, outperforming the industry’s growth of 4.1%.
Image Source: Zacks Investment Research
Why MCO Stock is an Attractive Investment Option
Revenue Strength: Moody’s remains focused on enhancing revenue growth. The company has increased exposure to the banking and insurance industry, and is diversifying into the emerging and fast-growing professional services and ERS businesses. A rising share of the analytics business, which is not correlated with the volatility of interest rates, has added stability to top-line growth.
Though revenues declined in 2022 because of weakness in bond issuance volumes, the same witnessed a four-year (2018-2022) CAGR of 5.3%. Given the improved mix and lower-risk nature of the company’s product portfolio, the top line is expected to rise. Moody’s is currently focused on investing in technology platforms and processes to boost operations.
The consensus estimate for sales indicates growth of 7.2% and 10.2% for 2023 and 2024, respectively.
Moody’s projects revenues to increase in the mid-to-high-single-digit percent range for 2023.
Synergies From Acquisitions: Moody’s growth has been reflected in several successful acquisitions over the past few years. In December 2022, it announced a deal to acquire SCRiesgo, which will bolster its presence in Central America and the Dominican Republic. In March 2022, in a bid to strengthen its Know Your Customer capabilities, the company purchased 360kompany AG, while in December 2021, it acquired PassFort Limited.
These strategic deals have provided MCO with increased scale and cross-selling opportunities across products and vertical markets. The company continues to pursue opportunistic deals, which are strategic fits and diversify the revenue base.
Earnings Growth: Over the past three to five years, Moody’s has witnessed earnings growth of 8.4%. Further, the company’s earnings are projected to grow 14.4% in 2023 and 13.4% in 2024.
Moody’s now expects 2023 adjusted earnings in the range of $9.50-$10.00 per share, up from the earlier projection of $9.00-$9.50. On a GAAP basis, this year's earnings are projected within $8.45-$8.95 per share, rising from the prior target of $8.05-$8.55.
Further, its long-term (three to five years) estimated earnings growth rate of 11.3% promises rewards for investors in the long run.
Also, the stock has a Growth Score of B. Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best upside potential.
Geolocation Restructuring Program: Amid a challenging operating backdrop, Moody’s is undertaking efforts to maintain profitability. The restructuring plan will accelerate a number of ongoing cost-efficiency initiatives and includes real estate optimization and increased utilization of lower-cost operational hubs.
The program is expected to result in annualized savings of $100-$135 million annually. The exit from certain leased office spaces is likely to result in $50-$70 million of pre-tax charges to either terminate or sublease the affected real estate leases.
The program also comprises $75-$100 million of pre-tax personnel-related restructuring charges, including severance and related costs primarily determined under MCO’s existing severance plans.
Cash outlays associated with the program are expected to be $75-$100 million, which are expected to be paid through 2024. The program is likely to be substantially complete by the end of this year.
Strong Balance Sheet: Moody’s diversifying efforts are well supported by a strong balance sheet position. As of Mar 31, 2023, it had total debt worth $7.5 billion, an undrawn revolving credit facility of $1.25 billion, and cash and cash equivalents and short-term investments of $2.20 billion. The company doesn’t have any significant debt maturities before 2024. These will enable it to continue pursuing growth opportunities.
Other Stocks Worth a Look
A couple of top-ranked finance stocks are Axos Financial (AX - Free Report) and WisdomTree, Inc. (WT - Free Report) .
The Zacks Consensus Estimate for Axos’ current-year earnings has been revised 1.7% upward over the past 60 days. Its shares have lost 1.8% in the past six months. Currently, AX sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
WisdomTree’ currently carries a Zacks Rank #2. Its earnings estimates for 2023 have been revised 16.7% upward over the past 30 days. In the past six months, WT shares have surged 28%.
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Here are 5 Reasons to Bet on Moody's (MCO) Stock Right Away
Strategic buyouts and revenue diversification initiatives will support Moody’s (MCO - Free Report) . Though the operating backdrop hasn’t improved much, green shoots are visible. Further, its ongoing cost-efficiency efforts will aid the bottom line.
Moody’s is witnessing upward earnings estimate revisions, reflecting analysts’ optimism regarding its earnings growth potential. In the past 30 days, the Zacks Consensus Estimate for earnings has moved marginally and 1% upward for 2023 and 2024, respectively. MCO currently carries a Zacks Rank #2 (Buy).
So far this year, shares of Moody’s have rallied 20.1%, outperforming the industry’s growth of 4.1%.
Image Source: Zacks Investment Research
Why MCO Stock is an Attractive Investment Option
Revenue Strength: Moody’s remains focused on enhancing revenue growth. The company has increased exposure to the banking and insurance industry, and is diversifying into the emerging and fast-growing professional services and ERS businesses. A rising share of the analytics business, which is not correlated with the volatility of interest rates, has added stability to top-line growth.
Though revenues declined in 2022 because of weakness in bond issuance volumes, the same witnessed a four-year (2018-2022) CAGR of 5.3%. Given the improved mix and lower-risk nature of the company’s product portfolio, the top line is expected to rise. Moody’s is currently focused on investing in technology platforms and processes to boost operations.
The consensus estimate for sales indicates growth of 7.2% and 10.2% for 2023 and 2024, respectively.
Moody’s projects revenues to increase in the mid-to-high-single-digit percent range for 2023.
Synergies From Acquisitions: Moody’s growth has been reflected in several successful acquisitions over the past few years. In December 2022, it announced a deal to acquire SCRiesgo, which will bolster its presence in Central America and the Dominican Republic. In March 2022, in a bid to strengthen its Know Your Customer capabilities, the company purchased 360kompany AG, while in December 2021, it acquired PassFort Limited.
These strategic deals have provided MCO with increased scale and cross-selling opportunities across products and vertical markets. The company continues to pursue opportunistic deals, which are strategic fits and diversify the revenue base.
Earnings Growth: Over the past three to five years, Moody’s has witnessed earnings growth of 8.4%. Further, the company’s earnings are projected to grow 14.4% in 2023 and 13.4% in 2024.
Moody’s now expects 2023 adjusted earnings in the range of $9.50-$10.00 per share, up from the earlier projection of $9.00-$9.50. On a GAAP basis, this year's earnings are projected within $8.45-$8.95 per share, rising from the prior target of $8.05-$8.55.
Further, its long-term (three to five years) estimated earnings growth rate of 11.3% promises rewards for investors in the long run.
Also, the stock has a Growth Score of B. Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best upside potential.
Geolocation Restructuring Program: Amid a challenging operating backdrop, Moody’s is undertaking efforts to maintain profitability. The restructuring plan will accelerate a number of ongoing cost-efficiency initiatives and includes real estate optimization and increased utilization of lower-cost operational hubs.
The program is expected to result in annualized savings of $100-$135 million annually. The exit from certain leased office spaces is likely to result in $50-$70 million of pre-tax charges to either terminate or sublease the affected real estate leases.
The program also comprises $75-$100 million of pre-tax personnel-related restructuring charges, including severance and related costs primarily determined under MCO’s existing severance plans.
Cash outlays associated with the program are expected to be $75-$100 million, which are expected to be paid through 2024. The program is likely to be substantially complete by the end of this year.
Strong Balance Sheet: Moody’s diversifying efforts are well supported by a strong balance sheet position. As of Mar 31, 2023, it had total debt worth $7.5 billion, an undrawn revolving credit facility of $1.25 billion, and cash and cash equivalents and short-term investments of $2.20 billion. The company doesn’t have any significant debt maturities before 2024. These will enable it to continue pursuing growth opportunities.
Other Stocks Worth a Look
A couple of top-ranked finance stocks are Axos Financial (AX - Free Report) and WisdomTree, Inc. (WT - Free Report) .
The Zacks Consensus Estimate for Axos’ current-year earnings has been revised 1.7% upward over the past 60 days. Its shares have lost 1.8% in the past six months. Currently, AX sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
WisdomTree’ currently carries a Zacks Rank #2. Its earnings estimates for 2023 have been revised 16.7% upward over the past 30 days. In the past six months, WT shares have surged 28%.