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Moody's Corporation MCO

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Huge Beat in the First Quarter, but Moody's Tells Investors Not to Get Too Excited

Rajiv Bhatia, CFA Equity Analyst

Analyst Note

| Rajiv Bhatia, CFA |

Moody's reported a big quarter with revenue of $1.60 billion, easily topping the FactSet consensus of $1.43 billion. Adjusted EPS of $4.06 was 44% above the consensus of $2.82. The strength was driven by higher ratings revenue, particularly in leveraged loans and high-yield bonds. Though a strong quarter, Moody’s only modestly raised its revenue outlook and we believe this disappointed investors. We will maintain our wide-moat rating and $284 fair value estimate as increases to our operating forecast are offset by higher tax rates in 2022 and beyond to reflect the possibility of higher corporate taxes.

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Company Profile

Business Description

Moody’s (along with S&P Ratings) is a leading provider of credit ratings on fixed income securities. Moody’s ratings segment, known as Moody’s Investors Service or MIS, includes corporates, structured finance, financial institutions, and public finance ratings. MIS represents a majority of the firm’s revenue and profits. Moody’s other segment is Moody’s Analytics and consists of Research, Data, and Analytics or RD&A and Enterprise Risk Solutions or ERS. RD&A’s products include credit research, quantitative credit scores, economic research, business intelligence, know your customer (KYC) tools, commercial real estate data and analytical tools, and training services. ERS includes risk management software solutions to financial institutions.

7 World Trade Center at 250 Greenwich Street
New York, NY, 10007
T +1 212 553-0300
Sector Financial Services
Industry Financial Data & Stock Exchanges
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 11,558