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Moody's Corp. (MCO)
NYSE:MCO
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Moody's
(NYSE:MCO)
70Outperform
Positive Factors
Cost Efficiency
Announced an efficiency program to drive $250-300M in annualized savings, with initiatives including go to market platform solutions and less OpEx and real estate.
Financial Performance
MCO posted a very strong 3Q result on the back of +51% rated issuance growth with total revenue increasing by 23%.
Growth Opportunities
Management cited long-term secular trends including maturity walls, private credit opportunities, transition finance, and digital infrastructure finance as drivers for growth.
Negative Factors
Debt Issuance Trends
As debt issuance trends are expected to slow, this could impact the stock.
Market Valuation
Valuation is considered stretched, and other names are preferred for nearer-term risk/reward.
Moody's Analytics Performance
Moody's Analytics showed continued deceleration with 9% ARR growth following 7 quarters of 10% growth.
Moody's (MCO) vs. S&P 500 (SPY)
Market Cap
$79.58B
Dividend Yield0.79%
Average Volume (3M)908.38K
Price to Earnings (P/E)39.3
Beta (1Y)1.21
Revenue Growth19.81%
EPS Growth28.97%
CountryUS
Employees15,838
SectorFinancial
Sector Strength85
IndustryFinancial - Data & Stock Exchanges
Share Statistics
EPS (TTM)11.26
Shares Outstanding179,889,330
10 Day Avg. Volume742,692
30 Day Avg. Volume908,376
Financial Highlights & Ratios
PEG Ratio1.36
Price to Book (P/B)N/A
Price to Sales (P/S)11.67
Price to Cash Flow (P/CF)30.70
P/FCF Ratio28.50
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$545.69Price Target Upside35.60% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering13
Moody's Business Overview & Revenue Model
Company DescriptionMoody's Corporation operates as an integrated risk assessment firm worldwide. It operates in two segments, Moody's Investors Service and Moody's Analytics. The Moody's Investors Service segment publishes credit ratings and provides assessment services on various debt obligations, programs and facilities, and entities that issue such obligations, such as various corporate, financial institution, and governmental obligations, as well as and structured finance securities. This segment provides ratings in approximately 140 countries. Its ratings are disseminated through press releases to the public through electronic media, including the internet and real-time information systems used by securities traders and investors. This segment has rated approximately 5,000 non-financial corporates; 3,600 financial institutions; 16,000 public finance issuers; 145 sovereigns; 47 supranational institutions; 459 sub-sovereigns; and 1,000 infrastructure and project finance issuers, as well as 9,100 structured finance deals. The Moody's Analytics segment develops a range of products and services that support the risk management activities of institutional participants in financial markets; and offers subscription based research, data, and analytical products comprising credit ratings, credit research, quantitative credit scores and other analytical tools, economic research and forecasts, business intelligence and company information products, commercial real estate data and analytical tools, and on-line and classroom-based training services, as well as credentialing and certification services. It also offers offshore analytical and research services with learning solutions and certification programs; and software solutions, as well as related risk management services. The company was formerly known as Dun and Bradstreet Company and changed its name to Moody's Corporation in September 2000. Moody's Corporation was founded in 1900 and is headquartered in New York, New York.
How the Company Makes MoneyMoody's Corporation generates revenue primarily through its two main segments: Moody's Investors Service and Moody's Analytics. The MIS segment is a major revenue driver, earning fees from issuing credit ratings for a diverse range of debt obligations and securities. These ratings are essential for issuers looking to attract investment, as well as for investors assessing risk. Moody's Analytics complements this by offering subscription-based services for risk management software, tools, and data solutions. Additionally, Moody's engages in strategic partnerships and acquisitions to expand its service offerings and geographic reach, further bolstering its revenue streams. The company's reputation and established position in the financial markets enhance its ability to maintain and grow its client base, ensuring a steady income flow.
Moody's Financial Statement Overview
Summary
Moody's financial performance is impressive, with strong revenue growth and robust profitability margins. The company effectively converts revenue into profit and cash, indicating strong operational management. Despite high leverage posing potential risks, the company's high ROE and effective cash flow management mitigate these concerns.Income Statement
Moody's has shown strong revenue growth with a 19.8% increase from 2023 to 2024. Gross profit margin remains robust at 72.6%, and net profit margin is strong at 29.0%. The EBIT and EBITDA margins are also solid at 40.6% and 40.8%, respectively, indicating efficient cost management and strong operational performance.85
Very Positive
Balance Sheet
The company has a high debt-to-equity ratio of 2.17, reflecting significant leverage, which could pose risks. However, ROE is impressive at 57.7%, showcasing effective use of equity to generate profits. The equity ratio is moderate at 23.0%, suggesting a balanced asset structure with a focus on leveraging debt efficiently.78
Positive
Cash Flow
Operating cash flows are strong with a 31.9% increase from 2023 to 2024. The free cash flow to net income ratio is favorable at 1.38, indicating efficient conversion of profits into cash. The operating cash flow to net income ratio is also healthy at 1.38, reflecting robust cash generation capabilities relative to net income.88
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 7.09B | 5.92B | 5.47B | 6.22B | 5.37B | Gross Profit |
| 5.14B | 4.23B | 3.85B | 4.58B | 3.90B | EBIT |
| 2.88B | 2.14B | 1.88B | 2.84B | 2.39B | EBITDA |
| 3.47B | 2.61B | 2.33B | 3.09B | 2.66B | Net Income Common Stockholders |
| 2.06B | 1.61B | 1.37B | 2.21B | 1.78B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 2.97B | 2.19B | 1.86B | 1.90B | 2.70B | Total Assets |
| 15.51B | 14.62B | 14.35B | 14.68B | 12.41B | Total Debt |
| 7.75B | 7.42B | 474.00M | 560.00M | 521.00M | Net Debt |
| 5.34B | 5.29B | -1.29B | -1.25B | -2.08B | Total Liabilities |
| 11.78B | 11.15B | 14.35B | 11.76B | 10.65B | Stockholders Equity |
| 3.56B | 3.32B | 2.52B | 2.92B | 1.76B |
| Cash Flow | Free Cash Flow | |||
| 2.84B | 1.88B | 1.19B | 1.87B | 2.04B | Operating Cash Flow |
| 2.84B | 2.15B | 1.47B | 2.00B | 2.15B | Investing Cash Flow |
| -1.06B | -247.00M | -262.00M | -2.62B | -1.08B | Financing Cash Flow |
| -1.45B | -1.58B | -1.21B | -122.00M | -351.00M |
Moody's Technical Analysis
Negative
402.43
Price Trends
481.18
Negative
480.27
Negative
470.02
Negative
Market Momentum
-4.30
Negative
49.09
Neutral
50.79
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MCO, the sentiment is Negative. The current price of 402.43 is below the 20-day moving average (MA) of 455.06, below the 50-day MA of 481.18, and below the 200-day MA of 470.02, indicating a bearish trend. The MACD of -4.30 indicates Negative momentum. The RSI at 49.09 is Neutral, neither overbought nor oversold. The STOCH value of 50.79 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for MCO.
Moody's Risk Analysis
Moody's disclosed 18 risk factors in its most recent earnings report. Moody's reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Moody's Peers Comparison
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $16.62B | 31.07 | 28.12% | 0.95% | 4.66% | 11.15% | |
74 Outperform | $160.30B | 41.36 | 11.44% | 0.75% | 13.68% | 49.90% | |
73 Outperform | $42.23B | 38.74 | -117.99% | 1.21% | 12.94% | -2.54% | |
70 Outperform | $79.58B | 39.27 | 59.80% | 0.79% | 19.81% | 28.97% | |
70 Outperform | $12.44B | 33.89 | 25.11% | 0.57% | 11.60% | 161.17% | |
63 Neutral | $14.39B | 9.81 | 8.95% | 4.37% | 16.38% | -11.64% | |
62 Neutral | $3.99B | ― | -0.85% | 2.24% | 2.93% | 39.49% |
* Financial Sector Average
Performance Comparison
MCO
Moody's
402.43
12.91
3.31%
FDS
Factset Research
416.19
-12.90
-3.01%
SPGI
S&P Global
451.50
23.13
5.40%
MORN
Morningstar
268.76
-39.30
-12.76%
MSCI
MSCI
507.44
-28.53
-5.32%
DNB
Dun & Bradstreet Holdings
8.73
-0.58
-6.23%
Moody's Earnings Call Summary
Earnings Call Date: Feb 13, 2025 | % Change Since: -20.23% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
Moody's delivered a strong financial performance in 2024 with significant revenue and earnings growth, driven by both Moody's Investor Service and Moody's Analytics. The company made strategic investments and acquisitions to enhance its offerings, while also achieving notable recognitions. However, challenges in transactional revenue and required restructuring efforts were noted. Overall, the positive aspects significantly outweighed the negatives.Highlights
Record-Breaking Revenue and Growth
Moody's achieved a record year in 2024 with a 20% increase in revenue, reaching over $7 billion, and a 26% growth in adjusted diluted EPS. The adjusted operating margin expanded by over 400 basis points.
Strong Performance in Moody's Investor Service (MIS)
MIS delivered an 18% total revenue growth, with a 29% increase in transactional revenue in Q4. The ratings team achieved 33% revenue growth and over 500 basis points of adjusted operating margin expansion for the full year.
Moody's Analytics Growth
Moody's Analytics saw a 10% growth in recurring revenue in Q4, with Decision Solutions leading with $1.4 billion in ARR growing at 12%.
Notable Achievements and Recognitions
Moody's was named the best rating agency for the thirteenth consecutive year by Extell. They issued nearly 400 private credit-related transactions and expanded Moody's Local into six more Central American countries with revenues up 16%.
Strategic Investments and Acquisitions
Moody's made three important acquisitions in the last six months, including Numerated, CreditCat, and Tape Analytics, enhancing product offerings in banking, insurance, and property analytics.
Lowlights
Challenges in Transactional Revenue
Despite robust issuance, transactional revenue growth was weaker than expected due to a high proportion of bank loan repricings, which have different economics.
Headwinds in Research and Insights
Research and insights faced attrition events from the asset manager space, affecting growth rates. However, sales growth was higher than ARR trends.
Restructuring and Efficiency Program
A restructuring program was announced to simplify the organization, with expected charges of $200 to $250 million over two years, primarily in personnel-related costs.
Company Guidance
During Moody's Corporation's earnings call for the fourth quarter and full year 2024, several key metrics and guidance for fiscal year 2025 were highlighted. Moody's reported a record year in 2024 with a 20% increase in revenue, surpassing $7 billion, and an adjusted operating margin expansion of over 400 basis points, leading to a 26% growth in adjusted diluted EPS. The Moody’s Investor Service (MIS) saw an 18% total revenue growth, with transactional revenue increasing by 29% in Q4. Additionally, Moody's Analytics (MA) achieved 10% recurring revenue growth in Q4 and a 9% increase in annualized recurring revenue (ARR). For 2025, the company expects high single-digit revenue growth and an adjusted operating margin expansion of about 200 basis points to approximately 50%. MIS is projected to have mid to high single-digit revenue growth, with a 62% to 63% adjusted operating margin, while MA is expected to achieve high single-digit revenue growth with ARR growth in the high single-digit to low double-digit range. Moody's also announced an efficiency program aiming for $250 million to $300 million in annualized cost savings. The company highlighted its strategic focus areas, including private credit, transition finance, and its investments in generative AI, to capitalize on evolving market demands.Moody's Corporate Events
Executive/Board Changes
Moody’s Announces New Chief Accounting Officer
Neutral
Mar 11, 2025
On March 11, 2025, Moody’s Corporation announced that Caroline Sullivan, the Chief Accounting Officer and Corporate Controller, will depart from her position on April 1, 2025. Jason Phillips, who has been with the company since 2003 and has held various significant roles, will succeed her. This transition is expected to maintain stability in the company’s accounting operations, given Mr. Phillips’ extensive experience and involvement in key financial reporting and policy teams.
Business Operations and StrategyFinancial Disclosures
Moody’s Reports Strong Q4 2024 Financial Results
Positive
Feb 13, 2025
Moody’s Corporation reported strong financial results for the fourth quarter and full year 2024, with revenue increasing by 20% year-over-year, reaching $7.1 billion. The growth was driven by robust performance across its business segments, with Moody’s Investors Service revenue up 33% and Moody’s Analytics revenue increasing by 8%. The company attributed its success to strategic investments in its platform, data, and product innovation, as well as disciplined execution. For 2025, Moody’s forecasts high single-digit revenue growth and adjusted diluted EPS growth in the low-to-mid teens, reflecting continued strong demand for its services.
Executive/Board Changes
Moody’s Implements New Executive Severance Policy
Neutral
Feb 12, 2025
On February 11, 2025, Moody’s Corporation’s Board of Directors implemented a new Executive Officer Cash Severance Policy. This policy requires stockholder approval for any new or amended executive officer arrangements that provide cash severance benefits exceeding 2.99 times the executive’s base salary plus target annual bonus, indicating a move towards greater shareholder involvement in executive compensation decisions.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.