Moody's (MCO) Up 1.2% Since Last Earnings Report: Can It Continue?

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].