The market expects Moody's (MCO) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended December 2024. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on February 13, 2025, might help the stock move higher if these key numbers are ...

Company Overview - Moody's (MCO) currently has a Momentum Style Score of B, indicating a positive momentum outlook [2] - The company holds a Zacks Rank of 2 (Buy), suggesting strong potential for outperformance in the market [3] Price Performance - Over the past week, Moody's shares have increased by 2.9%, outperforming the Zacks Financial - Miscellaneous Services industry, which rose by only 0.1% [5] - In the last month, Moody's stock has appreciated by 3.58%, compared to the industry's 0.33% [5] - Over the past quarter, Moody's shares have risen by 6.33%, and over the last year, they have increased by 25.07%, while the S&P 500 has moved 3.85% and 24.08% respectively [6] Trading Volume - Moody's has an average 20-day trading volume of 546,793 shares, which serves as a bullish indicator when combined with rising stock prices [7] Earnings Outlook - In the last two months, 7 earnings estimates for Moody's have been revised upwards, while none have been revised downwards, leading to an increase in the consensus estimate from $12.07 to $12.39 [9] - For the next fiscal year, 6 estimates have moved higher, with only 1 downward revision during the same period [9] Conclusion - Considering the positive momentum indicators and earnings outlook, Moody's is positioned as a 2 (Buy) stock with a Momentum Score of B, making it a strong candidate for near-term investment [11]

Earnings Season and Market Trends - The current earnings season is unfolding, with significant attention on the emerging threat of DeepSeek [1] - The new frenzy around DeepSeek might indirectly create a strong tailwind for Moody's Corporation [1] Investment Strategy - The focus is on long-term growth and dividend growth investing, targeting undervalued stocks and high-quality dividend-growing companies in both the US and European markets [1] - Profitability is emphasized as a safer driver of gains compared to low valuation, with importance placed on margins, free cash flow stability and growth, and returns on invested capital [1] - Research is conducted within areas of competence, with a preference for high-quality companies that warrant in-depth analysis [1]

Core Insights - Moody's has announced an agreement to acquire CAPE Analytics, enhancing its risk evaluation capabilities through advanced geospatial AI analytics [1][2] - The acquisition aims to provide instant, address-specific risk insights by integrating CAPE's technology with Moody's Intelligent Risk Platform [1][3] Acquisition Details - The acquisition is expected to close later this quarter, pending regulatory approvals, with undisclosed financial terms that are not anticipated to significantly impact Moody's financial results [2] - CAPE's technology includes computer vision, machine learning, and geospatial imagery, which will allow Moody's to deliver detailed property risk assessments [4] Strategic Implications - This move reflects Moody's commitment to innovation in risk evaluation and aligns with trends in insurtech and AI-driven risk assessment [5] - The integration of CAPE's data will empower insurance carriers and financial stakeholders to better evaluate property exposures and natural hazard risks [3][5] Market Performance - Moody's shares have risen 20.6% in the past year, outperforming the industry's growth of 15.6% [6]

Group 1 - France's credit rating was downgraded by Moody's from "Aa2" to "Aa3" due to concerns over political fragmentation, impacting the country's ability to address its budget deficit and debt [1][2] - The downgrade has led to negative market reactions, with France's CAC 40 index falling by 0.7% and the yield on the 10-year government bond trading at 3.03%, closely trailing Greece's yield of 3.09% [3][4] - Political instability in France has been exacerbated by indecisive parliamentary elections and the recent fall of Prime Minister Michel Barnier's government after just three months [5][6] Group 2 - The new Prime Minister Francois Bayrou, appointed by President Emmanuel Macron, faces the challenge of addressing France's significant debt, projected at around 112% of GDP in 2024, and a budget deficit expected to reach 6.1% this year [7]

Core Viewpoint - Moody's has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive trend in earnings estimates which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [3][5]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, leading to buying or selling actions that affect stock prices [3]. Moody's Earnings Outlook - For the fiscal year ending December 2024, Moody's is projected to earn $12.07 per share, reflecting a 21.9% increase from the previous year [7]. - Over the past three months, the Zacks Consensus Estimate for Moody's has risen by 6.4%, indicating a positive trend in earnings expectations [7]. Zacks Rank System - The Zacks Rank system categorizes stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks which have averaged a +25% annual return since 1988 [6]. - Moody's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for higher returns in the near term [10].

Core Insights - Moody's has acquired Numerated Growth Technologies to enhance its Lending Suite, providing a comprehensive loan origination and monitoring solution for banking clients [1][4] - Numerated's platform has facilitated over $65 billion in lending for more than 500,000 businesses, supported by financial institutions with a total of $3 trillion in assets [2] - The acquisition builds on a partnership initiated in January 2024, integrating Numerated's technology with Moody's credit assessment expertise [3] Company Strategy - The acquisition aligns with Moody's strategy to deliver advanced risk management tools and insights, reinforcing its leadership in financial analytics [4] - Moody's is focusing on expanding its presence in the banking and insurance sectors while diversifying into professional services and enterprise risk solutions [6] - The company has been actively expanding through acquisitions, including the recent acquisition of Praedicat to enhance insurance solutions [5] Market Performance - Moody's shares have increased by 22.4% this year, outperforming the industry's growth of 16.7% [7]

Core Viewpoint - Moody's reported strong Q3 2024 earnings, driven by robust bond issuance and analytics demand, leading to upward revisions in future earnings guidance [2][9][21]. Financial Performance - Adjusted earnings for Q3 2024 were $3.21 per share, exceeding the Zacks Consensus Estimate of $2.89, and reflecting a 32% increase year-over-year [2][3]. - Quarterly revenues reached $1.81 billion, surpassing the Zacks Consensus Estimate of $1.73 billion, and increased by 23% compared to the previous year [4]. - Total expenses rose to $1.08 billion, a 15% increase year-over-year, while adjusted operating income soared 32% to $867 million, resulting in an adjusted operating margin of 47.8%, up from 44.6% a year ago [5]. Segment Performance - Moody's Investors Service revenues surged 41% year-over-year to $982 million, driven by strong Corporate Finance and Structured Finance performance [6]. - Moody's Analytics revenues increased by 7% to $831 million, supported by demand for proprietary data and analytical insights [6]. Balance Sheet Strength - As of September 30, 2024, Moody's had total cash and short-term investments of $3.22 billion, up from $2.19 billion at the end of 2023 [7]. - The company reported $6.88 billion in outstanding debt and $1.25 billion in additional borrowing capacity [7]. Share Repurchase and Guidance - During the quarter, Moody's repurchased 0.9 million shares at an average price of $464.77 [8]. - For 2024, adjusted earnings guidance was raised to $11.90-$12.10 per share, up from the previous range of $11.00-$11.40 [9]. - Revenue growth is now projected in the high-teens percent range, an increase from the prior low-teens percent target [10]. Future Outlook - Operating expenses are expected to rise approximately 10%, with net interest expenses estimated at nearly $245 million [11]. - The company anticipates cash flow from operations of around $2.7 billion and free cash flow of nearly $2.3 billion [12]. - Moody's plans to repurchase shares worth almost $1.3 billion [13]. - The effective tax rate is projected to be between 23-24% [14]. Segment Outlook for 2024 - The MIS segment is expected to see revenue growth in the high-20s percent range, an increase from the previous high-teens percent projection [15]. - The adjusted operating margin for this segment is anticipated to be between 59-60% [16]. - The MA segment is expected to grow revenues in the high-single-digit percentage range, with an adjusted operating margin of 30-31% [18].

Revenue Growth - Revenue for the three months ended September 30, 2024, was $1,813 million, a 23.2% increase from $1,472 million in the same period of 2023[17] - Total external revenue for the three months ended September 30, 2024, was $982 million, a 41% increase from $696 million in the same period of 2023[46] - Total revenue for Moody's Corporation in Q3 2024 reached $1,813 million, a 39% increase compared to $1,472 million in Q3 2023[50] - Total revenue for the nine months ended September 30, 2024, reached $3,128 million, a 35% increase compared to $2,314 million in the same period of 2023[193] - Moody's total revenue for the nine months ended September 30, 2024, was $5,416 million, representing a 22% increase from $4,436 million in 2023[58] Income and Earnings - Net income attributable to Moody's for the three months ended September 30, 2024, was $534 million, compared to $389 million in the same period of 2023, representing a 37.4% increase[17] - Basic earnings per share for the three months ended September 30, 2024, was $2.94, an increase from $2.12 in the same period of 2023[17] - Net income for the nine months ended September 30, 2024, was $1,664 million, an increase from $1,268 million in the same period of 2023, representing a growth of approximately 31%[25] - The diluted EPS attributable to Moody's common shareholders increased by 39% to $2.93, while adjusted diluted EPS rose by 32% to $3.21[138] Operating Performance - Operating income for the three months ended September 30, 2024, was $738 million, up 37.9% from $535 million in the same period of 2023[17] - Adjusted Operating Income for 2024 was $867 million, compared to $657 million in 2023, reflecting a 32% growth[121] - Operating margin improved to 40.7%, up 440 basis points from 36.3% in the prior year, reflecting strong revenue growth[137] - Adjusted operating margin improved to 62.5%, up from 55.3% in the previous year[193] Expenses and Costs - Total expenses for the three months ended September 30, 2024, were $1,075 million, compared to $937 million in the same period of 2023, reflecting a 14.7% increase[17] - Total operating and SG&A expenses rose to $946 million, a 16% increase from $815 million, primarily due to higher compensation costs[137] - Total operating and SG&A expenses for MA increased by 9% to $1,721 million, with compensation expenses rising by $102 million[189] Assets and Liabilities - Total current assets increased to $5,393 million as of September 30, 2024, compared to $4,341 million at December 31, 2023, reflecting a growth of about 24%[23] - Total liabilities increased to $11,701 million as of September 30, 2024, compared to $11,146 million at December 31, 2023, marking an increase of about 5%[23] - Total shareholders' equity increased to $4,068 million as of September 30, 2024, up from $3,476 million at December 31, 2023, representing a growth of about 17%[23] Cash Flow and Investments - The company reported net cash provided by operating activities of $2,164 million for the nine months ended September 30, 2024, compared to $1,674 million for the same period in 2023, a growth of approximately 29%[25] - Cash and cash equivalents at the end of the period were $2,642 million, up from $2,006 million at the end of the previous year, indicating a rise of approximately 32%[25] - The company has invested in COLI with a contract value of $49 million as of September 30, 2024, up from $47 million as of December 31, 2023[65] Segment Performance - Decision Solutions (DS) revenue reached $383 million, up from $354 million year-over-year, with a notable increase in KYC revenue from $80 million to $95 million[45] - Corporate Finance (CFG) revenue surged to $515 million, compared to $346 million in the prior year, driven by a significant rise in investment-grade revenue from $63 million to $149 million[45] - Moody's Analytics (MA) external revenue increased by 7% to $831 million, driven by sustained demand for KYC and insurance offerings[137] Tax and Compliance - The effective tax rate (ETR) for the nine months ended September 30, 2024, was 23.5%, an increase from 14.6% in the same period of 2023, primarily due to prior year tax benefits not recurring[62] - The company is subject to ongoing tax audits and legal proceedings, which may impact its financial position and operations[117] Strategic Initiatives - The company acquired a controlling financial interest in GCR in July 2024, expanding its market presence in Africa[10] - Moody's acquired a controlling financial interest in Praedicat in September 2024, enhancing its analytics capabilities in casualty insurance[12] - The restructuring program is expected to generate annualized savings of $145 million to $165 million, with cumulative expenses incurred amounting to $213 million[87]

Core Insights - The article emphasizes the importance of independent analysis and the need for investors to consult registered financial advisors before making investment decisions [1][2] Group 1 - The content does not provide specific company or industry insights, focusing instead on the nature of the analysis and the independence of the authors [1][2]