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Can Moody's (MCO) Keep Its Beat Streak Alive in Q4 Earnings?

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Moody's Corporation (MCO - Free Report) is scheduled to report fourth-quarter 2019 earnings on Feb 12, before market open. The credit rating company’s quarterly results surpassed the Zacks Consensus Estimate in the last three reported quarters. In fact, shares of Moody's, which have soared 64.5% over a year, have outperformed the broader S&P 500 index’s rise of 20.3%.

Factors That Could Drive the MCO Stock

Moody’s, which is one of the only three chief debt rating agencies in the world, had a string of favorable factors perking up its shares through last year.

First, the low-rate environment created by the Federal Reserve in 2019 boosted credit rating agencies. The central bank cut its benchmark rates thrice last year with the rates now in a 1.5-1.75% range. As the Fed implemented its rate reductions amid geopolitical concerns, more companies gained confidence to issue more debt.

This not only lifted Moody’s revenues throughout the first three quarters of last year but might have also aided its top line in the fourth quarter. Thus, revenues in the Corporate Finance line of the company, the largest revenue provider at the Moody's Investors Service division, are expected to have risen for the period to be reported.

In the quarter ended December 2019, there was a minor improvement in issuance volumes of investment grade bond and leveraged loan while that of high yield bond was highly strong. (Read more)

The second point is that as of Dec 31, 2019, Moody’s witnessed solid cash flow compared with its peers’ collection on a year-over-year basis. This 21.8% cash flow growth clearly beats the Zacks Financial - Miscellaneous Services industry’s average of -12.4%. In addition, Moody’s annualized cash flow growth rate over the past 3-5 years has been 12.4%, up from the industry average of 9.9%. (Read more)

Q4 Earnings and Revenue Expectations for Moody's

Coming to Zacks’ earnings and revenue projections, the Zacks Consensus Estimate for Moody'sfourth-quarter 2019 earnings is $1.92 per share, which suggests significant improvement (17.8%) from the year-ago earnings of $1.63 (Q4 2018).

In addition, the Zacks Consensus Estimate for Moody'sfourth-quarter revenues stands at $1.21 billion, indicating a 14.3% rise from $1.06 billion reported for the December 2018 quarter.

Apart from these encouraging figures, the Zacks Consensus Estimate for the company’s current-year earnings has moved 0.9% north in the past 60 days.

Finally, our proprietary model predicts an earnings beat for Moody's this reporting cycle. The right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. In this case, the stock fulfills the above-mentioned criteria. The credit rating authority has an Earnings ESP of +0.57% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Moody's Corporation Price and EPS Surprise

Moody's Corporation Price and EPS Surprise

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

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