Bloomberg News

Moody’s Tops Second-Quarter Profit Estimates on Ratings

July 25, 2014

Moody’s Corp. (MCO:US), owner of the second-largest credit-ratings company, reported quarterly profit that beat analysts’ estimates as higher corporate bond issuance boosted demand for credit rankings.

Second-quarter net income climbed to $319.2 million from $225.5 million a year earlier, the New York-based company (MCO:US) said today in a statement. Profit excluding certain items (MCO:US) was $1.12 a share, exceeding the $1.02 average estimate of 11 analysts in a Bloomberg survey.

Corporate bond sales in the U.S. surged to a record $468.8 billion in the three months ended June 30, up from $370.3 billion in the same period last year, according to data compiled by Bloomberg. Since 2008, Moody’s has reported five straight years (MCO:US) of increasing annual revenue as companies tapped debt markets to take advantage of record-low borrowing costs.

“We had a white-hot second quarter” in terms of speculative-grade bond issuance, Chief Financial Officer Linda Huber said today on a conference call with analysts. “We’re cautious, as we’re usually cautious, about whether that pace can continue.”

Moody’s increased its forecast for revenue growth to the “low-double-digit percent range” in 2014, up from a previously announced “high-single-digit percent range,” the company said in the statement. Moody’s said it still expects full-year profit excluding certain items of $3.90 to $4 a share.

Shares Fall

Moody’s fell from a record high, declining 0.9 percent to $91.62 in New York. The shares have gained 16.8 percent this year, compared with a 7 percent rise in the Standard & Poor’s 500 Index. Moody’s surged 55.9 percent last year, almost double the S&P’s 29.6 percent gain.

Moody’s said revenue in the quarter rose 16 percent to $873.5 million from $756 million a year earlier. Sales at Moody’s Investors Service, the credit ratings unit that accounts (MCO:US) for about 70 percent of the firm’s revenue, advanced 16 percent to $621.7 million, with grading of company bond sales climbing 22 percent to $320.9 million and ratings on structured-finance debt rising 13.8 percent to $110.6 million.

Revenue from Moody’s Analytics, which distributes research and data, increased 15 percent to $251.8 million.

Competitor McGraw Hill Financial Inc. (MHFI:US), owner of the largest credit-rating company, Standard & Poor’s, is scheduled to report second-quarter earnings July 29.

Warren Buffett’s Berkshire Hathaway Inc. is Moody’s biggest shareholder (MCO:US) with an 11.5 percent stake valued at about $2.3 billion, Bloomberg data show.

To contact the reporter on this story: Matt Robinson in New York at mrobinson55@bloomberg.net

To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net John Parry, Caroline Salas Gage


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Companies Mentioned

  • MCO
    (Moody's Corp)
    • $94.73 USD
    • -0.52
    • -0.55%
  • MHFI
    (McGraw Hill Financial Inc)
    • $86.13 USD
    • -0.43
    • -0.5%
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