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Moody's Corporation MCO

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Driven by Strong Corporate Bond Issuance, Moody’s Beats Consensus and Raises Outlook

Rajiv Bhatia Equity Analyst

Analyst Note

| Rajiv Bhatia |

Wide-moat Moody’s reported strong third-quarter financial results. Revenue for the quarter was $1.36 billion, meaningfully above the FactSet consensus of $1.22 billion. Strong revenue and minimal expense growth meant that the firm’s adjusted EPS of $2.69 handily beat the consensus estimate of $2.09. Moody’s ratings segment was the star of the quarter, as the firm is benefiting from strong issuance volumes and pricing. Transaction ratings revenue grew 15% while non-transaction ratings revenue grew 3%. Moody’s also tweaked its full-year 2020 outlook higher but acknowledged issuance headwinds could materialize in 2021. As a result of the strong quarter, we intend to increase our fair value estimate to $240 from $235.

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Company Profile

Business Description

Moody's is the world's second- largest provider of credit ratings, trailing only S&P Global. The company provides ratings on more than a third of the total bond ratings in existence. Within ratings, roughly half of its revenue is derived from corporate issuers, while the rest of its corporate ratings are split among financial institutions, structured products, and public institutions. Moody's Analytics (13.5% of operating income) provides ancillary software and data solutions to issuers and investors. In 2017, the company bought Bureau van Dijk, a provider of private company data, for $3.5 billion to bolster its efforts in analytics.

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 Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 11,397