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Moody's (MCO) Beats Q2 Earnings Estimates, Raises 2021 View

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Moody's MCO reported second-quarter 2021 adjusted earnings of $3.22 per share, which easily outpaced the Zacks Consensus Estimate of $2.76. The bottom line grew 15% from the year-ago quarter.

Results benefited from decent bond issuance volume, which led to revenue growth. The company’s liquidity position was robust during the quarter. However, higher operating expenses acted as headwind.

After taking into consideration certain non-recurring items, net income attributable to Moody's Corporation was $577 million or $3.07 per share, up from $509 million or $2.69 per share in the prior-year quarter.

Revenues Improve, Costs Up

Revenues of $1.55 billion beat the Zacks Consensus Estimate of $1.49 billion. The top line grew 8% year over year. Foreign currency translation favorably impacted the top line by 3%.

Total expenses were $752 million, up 4% from the prior-year quarter. Foreign currency translation negatively impacted operating expenses by 3%.

Adjusted operating income of $861 million rose 12%. Adjusted operating margin was 55.4%, up from 53.4% a year ago.

Decent Segment Performance

Moody’s Investors Service revenues increased 4% year over year to $980 million. Foreign currency translation favorably impacted the segment’s revenues by 2%.

Corporate finance revenues declined, given the fall in global investment grade activity. Financial institutions’ revenues grew as infrequent EMEA bank issuers took advantage of low interest rates and tight spreads in order to refinance existing debt.

Public, project and infrastructure finance revenues fell from the year-ago level, given a reduction in U.S. infrastructure supply. Structured finance revenues were up, mainly driven by significant increase in collateralized loan obligation refinancing activity and commercial mortgage-backed securities issuance.

Moody’s Analytics revenues grew 15% year over year to $573 million. Foreign currency translation favorably impacted the segment’s revenues by 5%.

The segment recorded growth in research, data and analytics revenues, as well as Enterprise Risk Solutions revenues.

Strong Balance Sheet

As of Jun 30, 2021, Moody’s had total cash, cash equivalents and short-term investments of $2.9 billion, up from $2.7 billion on Dec 31, 2020. The company had $6.4 billion of outstanding debt and $1 billion in additional borrowing capacity under the revolving credit facility.

Share Repurchase Update

During the quarter, Moody's repurchased 1.1 million shares for $371 million.

Upbeat 2021 Guidance

Following solid first-half 2021 performance, Moody’s raised full-year guidance.

The company now expects adjusted earnings in the range of $11.55-$11.85 per share, up from prior expectation of $11.00-$11.30 per share. The Zacks Consensus Estimate for the bottom line for 2021 is $10.42, which is below the company’s adjusted earnings guidance.

On GAAP basis, earnings are now projected within $10.95-$11.25 per share. Earlier, the company had expected GAAP earnings in the range of $10.40-$10.70 per share.

Moody’s projects revenues to increase in the low-double-digit percent range, up from the prior anticipation of growth in the high-single-digit percent range.

Our Take

Moody’s remains well positioned for growth on the back of a strong market position, strength in diverse operations and strategic acquisitions. However, steadily increasing operating expenses are likely to hurt its financials to some extent.

Moodys Corporation Price, Consensus and EPS Surprise

Moodys Corporation Price, Consensus and EPS Surprise
Moodys Corporation Price, Consensus and EPS Surprise

Moodys Corporation price-consensus-eps-surprise-chart | Moodys Corporation Quote

Currently, Moody’s carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Stocks

Moelis & Company MC recorded second-quarter 2021 adjusted earnings per share of $1.19, surpassing the Zacks Consensus Estimate of 82 cents. In the prior-year quarter, the company recorded a loss per share of 11 cents.

Associated Banc-Corp’s ASB second-quarter 2021 earnings of 56 cents per share surpassed the Zacks Consensus Estimate of 52 cents. The bottom line improved significantly from adjusted earnings of 26 cents in the prior-year quarter.

Blackstone’s BX second-quarter 2021 distributable earnings of 82 cents per share surpassed the Zacks Consensus Estimate of 80 cents. The figure reflects a rise of 90.7% from the prior-year quarter.


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