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Robust Global Bond Issuances to Aid Moody's (MCO) Q4 Earnings
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Moody's (MCO - Free Report) is scheduled to announce fourth-quarter and full-year 2023 results on Feb 13, 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 solid revenue performance in the to-be-reported quarter.
Global issuance activity was robust in the fourth quarter of 2023 compared with the prior-year quarter. The issuance volume also got boosted by the tightening of corporate spreads in the latter half of the quarter.
All three sub-categories within non-financial corporate bonds (investment grade, high yield and leveraged loans) witnessed strong gains on a year-over-year basis. On the other hand, financial institution issuance volume recorded a modest fall.
The Zacks Consensus Estimate for revenues from the Corporate Finance line of $322 million indicates a 27.3% jump from the prior-year quarter. The consensus estimate for revenues for the Financial Institutions business line of $123.1 million suggests relative stability.
Further, municipal bond issuance volume witnessed a solid rise. The Zacks Consensus Estimate for Public, Project and Infrastructure Finance business of $115.3 million suggests a 22.6% surge.
Likewise, quarterly issuance volumes for residential mortgage-backed securities, collateral debt obligations and asset-backed securities were robust. Thus, Structured Finance revenues are likely to have been favorably impacted. The consensus estimate for the same stands at $108.1 million, suggesting a 15% growth.
The Zacks Consensus Estimate for MIS division revenues in the to-be-reported quarter of $731.4 million implies a 17.8% increase.
Management expects MIS division revenues to increase in the mid-to-high-single-digit percent range in 2023.
Other Factors to Impact Q4 Results
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 third 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 quarterly revenues is pegged at $799.7 million, indicating an 11.5% increase from the prior-year quarter.
Moody’s anticipates MA division revenues to grow 10% in 2023.
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. Further, inflation is likely to have led to expense growth. Hence, overall expenses might have been elevated.
Earnings Whispers
According to our proven model, the chances of Moody’s beating the Zacks Consensus Estimate this time are low. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.
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 -2.53%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at $2.34, which has remained unchanged over the past seven days. The figure indicates a 46.3% jump from the year-ago reported number.
The consensus estimate for sales of $1.49 billion suggests 15.5% year-over-year growth.
Management Guidance for 2023
Moody’s anticipates adjusted earnings to be in the range of $9.75-$10.25 per share. On a GAAP basis, earnings are projected within $8.60-$9.10 per share.
Moody’s projects revenues to increase in the high-single-digit percent range.
Operating expenses are expected to rise in the mid-single-digit percent range.
Net interest expenses are expected to be $250-$260 million.
Adjusted operating margin is expected to be 44-45%. The operating margin is likely to be nearly 37%.
Moody’s expects cash flow from operations of approximately $2.1 billion. Free cash flow is projected to be $1.8 billion.
Performance of Other Finance Stocks
Ares Capital Corporation’s (ARCC - Free Report) fourth-quarter 2023 core earnings of 63 cents per share surpassed the Zacks Consensus Estimate of 59 cents. The bottom line matched the prior-year quarter’s figure.
Results were primarily aided by an improvement in the total investment income. Also, the company’s portfolio activity was robust in the quarter. However, an increase in expenses hurt ARCC’s results to some extent.
The Carlyle Group Inc.’s (CG - Free Report) fourth-quarter 2023 post-tax distributable earnings per share of 86 cents beat the Zacks Consensus Estimate of 75 cents. However, the bottom line declined from $1.01 in the year-ago quarter.
CG’s results benefited from an increase in segment fee revenues and lower expenses. Further, an increase in assets under management balance acted as a tailwind. However, a fall in realized performance revenues was the undermining factor.
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Robust Global Bond Issuances to Aid Moody's (MCO) Q4 Earnings
Moody's (MCO - Free Report) is scheduled to announce fourth-quarter and full-year 2023 results on Feb 13, 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 solid revenue performance in the to-be-reported quarter.
Global issuance activity was robust in the fourth quarter of 2023 compared with the prior-year quarter. The issuance volume also got boosted by the tightening of corporate spreads in the latter half of the quarter.
All three sub-categories within non-financial corporate bonds (investment grade, high yield and leveraged loans) witnessed strong gains on a year-over-year basis. On the other hand, financial institution issuance volume recorded a modest fall.
The Zacks Consensus Estimate for revenues from the Corporate Finance line of $322 million indicates a 27.3% jump from the prior-year quarter. The consensus estimate for revenues for the Financial Institutions business line of $123.1 million suggests relative stability.
Further, municipal bond issuance volume witnessed a solid rise. The Zacks Consensus Estimate for Public, Project and Infrastructure Finance business of $115.3 million suggests a 22.6% surge.
Likewise, quarterly issuance volumes for residential mortgage-backed securities, collateral debt obligations and asset-backed securities were robust. Thus, Structured Finance revenues are likely to have been favorably impacted. The consensus estimate for the same stands at $108.1 million, suggesting a 15% growth.
The Zacks Consensus Estimate for MIS division revenues in the to-be-reported quarter of $731.4 million implies a 17.8% increase.
Management expects MIS division revenues to increase in the mid-to-high-single-digit percent range in 2023.
Other Factors to Impact Q4 Results
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 third 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 quarterly revenues is pegged at $799.7 million, indicating an 11.5% increase from the prior-year quarter.
Moody’s anticipates MA division revenues to grow 10% in 2023.
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. Further, inflation is likely to have led to expense growth. Hence, overall expenses might have been elevated.
Earnings Whispers
According to our proven model, the chances of Moody’s beating the Zacks Consensus Estimate this time are low. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.
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 -2.53%.
Zacks Rank: The company currently carries a Zacks Rank #3.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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 fourth-quarter earnings is pegged at $2.34, which has remained unchanged over the past seven days. The figure indicates a 46.3% jump from the year-ago reported number.
The consensus estimate for sales of $1.49 billion suggests 15.5% year-over-year growth.
Management Guidance for 2023
Moody’s anticipates adjusted earnings to be in the range of $9.75-$10.25 per share. On a GAAP basis, earnings are projected within $8.60-$9.10 per share.
Moody’s projects revenues to increase in the high-single-digit percent range.
Operating expenses are expected to rise in the mid-single-digit percent range.
Net interest expenses are expected to be $250-$260 million.
Adjusted operating margin is expected to be 44-45%. The operating margin is likely to be nearly 37%.
Moody’s expects cash flow from operations of approximately $2.1 billion. Free cash flow is projected to be $1.8 billion.
Performance of Other Finance Stocks
Ares Capital Corporation’s (ARCC - Free Report) fourth-quarter 2023 core earnings of 63 cents per share surpassed the Zacks Consensus Estimate of 59 cents. The bottom line matched the prior-year quarter’s figure.
Results were primarily aided by an improvement in the total investment income. Also, the company’s portfolio activity was robust in the quarter. However, an increase in expenses hurt ARCC’s results to some extent.
The Carlyle Group Inc.’s (CG - Free Report) fourth-quarter 2023 post-tax distributable earnings per share of 86 cents beat the Zacks Consensus Estimate of 75 cents. However, the bottom line declined from $1.01 in the year-ago quarter.
CG’s results benefited from an increase in segment fee revenues and lower expenses. Further, an increase in assets under management balance acted as a tailwind. However, a fall in realized performance revenues was the undermining factor.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.