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Moody's (MCO) Q3 Earnings & Revenues Top Estimates, Costs Up

Moody's MCO reported third-quarter 2023 adjusted earnings of $2.43 per share, which handily beat the Zacks Consensus Estimate of $2.35. The bottom line also jumped 31% from the year-ago quarter figure.

Gradual improvement in global bond issuance volumes and steady demand for analytics supported Moody’s results. The company’s liquidity position was robust during the quarter. However, an increase in operating expenses was a headwind.

After taking into consideration certain non-recurring items, net income attributable to Moody's was $389 million or $2.11 per share, up from $303 million or $1.65 per share in the prior-year quarter.

Revenues Up, Costs Rise

Quarterly revenues were $1.47 billion, which outpaced the Zacks Consensus Estimate of $1.46 billion. The top line grew 15.5% year over year.

Total expenses were $937 million, up 9%. Foreign currency translation adversely impacted expenses by 2%. MCO recorded restructuring charges of $27 million during the quarter related to the 2022–2023 Geolocation Restructuring Program.

Adjusted operating income of $657 million was up 32%. Adjusted operating margin was 44.6%, up from 39% a year ago.

Solid Segment Performance

Moody’s Investors Service revenues grew 18% year over year to $696 million. The improvement was mainly driven by solid leveraged finance and infrequent banking issuer activity.

Moody’s Analytics revenues increased 13% to $776 million. This was mainly driven by double-digit growth in all lines of business.

Strong Balance Sheet

As of Sep 30, 2023, Moody’s had total cash, cash equivalents and short-term investments of $2.08 billion, up from $1.86 billion as of Dec 31, 2022.

The company had $6.9 billion in outstanding debt and $1.25 billion in additional borrowing capacity under the revolving credit facility.

Share Repurchase Update

During the quarter, Moody's repurchased 0.5 million shares at an average price of $337.46 per share.

Upbeat 2023 Guidance

Moody’s affirmed 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, a change from the prior target of $8.70-$9.20.

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.

Our Viewpoint

Moody’s remains well-positioned for growth on the back of a solid market position, strength in diverse operations and strategic acquisitions. However, elevated operating expenses and geopolitical and macroeconomic concerns are likely to hurt its financials.

Moody's Corporation Price, Consensus and EPS Surprise

Moody's Corporation Price, Consensus and EPS Surprise
Moody's Corporation Price, Consensus and EPS Surprise

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

Currently, Moody’s carries a Zacks Rank #4 (Sell).

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

Earnings Dates & Expectations of Other Finance Stocks

Capital One COF is scheduled to announce quarterly numbers on Oct 26.

Over the past seven days, the Zacks Consensus Estimate for COF’s quarterly earnings has been revised almost 1% lower to $3.23, suggesting a 23.1% decline from the prior-year quarter.

LPL Financial LPLA is also slated to announce third-quarter 2023 numbers on Oct 26.

Over the past seven days, the Zacks Consensus Estimate for LPLA’s quarterly earnings has remained unchanged at $3.59, implying a 14.7% rise year over year.

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