It has been about a month since the last earnings report for Moody's (MCO) . Shares have lost about 0.7% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Moody's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important catalysts.Moody's Q2 Earnings Beat Estimates, Revenues & Expenses Ris ...

Core Insights - S&P Global Inc. (SPGI) reported strong second-quarter 2025 results, with earnings and revenues exceeding expectations [1][8] - Adjusted earnings per share (EPS) reached $4.43, surpassing the Zacks Consensus Estimate by 4.2% and increasing 9.7% year over year [1][8] - Revenues totaled $3.8 billion, beating the consensus estimate by 2% and growing 5.8% year over year [1][8] Revenue Breakdown - Marketing Intelligence revenues were $1.2 billion, a 5% increase from the previous year, meeting estimates [3] - Ratings revenues rose 1% to $1.1 billion, also meeting projections [3] - Commodity Insights revenues increased 8% to $555 million, exceeding the estimate of $539.8 million [3] - Mobility and Indices segments saw significant growth, with revenues of $438 million (10% increase) and $446 million (15% increase), both surpassing projections [4] Profitability Metrics - Adjusted operating profit was $1.9 billion, reflecting a 7% year-over-year growth [4] - The adjusted operating profit margin improved to 51.4%, up 70 basis points from the previous year [4] Financial Position - At the end of Q2 2025, SPGI had cash and cash equivalents of $1.8 billion, up from $1.5 billion in the previous quarter [5] - Long-term debt remained stable at $11.4 billion [5] - The company generated $1.4 billion in cash from operating activities, with free cash flow of $1.3 billion [5] Future Outlook - SPGI raised its adjusted EPS guidance to a range of $17.00-$17.25, with a midpoint of $17.13, which is above the Zacks Consensus Estimate of $17.04 [6][8] - Revenue growth is projected at 5-7%, with capital expenditure guidance set at $180-$190 million [6]

Financial Data and Key Metrics Changes - Moody's reported a record year in 2024, with revenue growth of 20% to over $7 billion and a 26% adjusted diluted EPS growth [9][37] - Adjusted operating margin expanded by over 400 basis points, reaching 51.3% in Q4 [9][38] - Q4 revenues were nearly $1.7 billion, up 13% year on year, with adjusted diluted EPS at $2.69, up 20% year on year [37][38] Business Line Data and Key Metrics Changes - Moody's Investors Service (MIS) achieved 18% total revenue growth, with a 29% growth in transactional revenue in Q4 [10][38] - Ratings revenue grew by 33% for the full year, with a 51.3% adjusted operating margin in Q4 [10][38] - Moody's Analytics (MA) reported Q4 revenue of $863 million, up 8% year on year, with recurring revenue growth of 10% [41][40] Market Data and Key Metrics Changes - MIS revenue growth was driven by a 134% increase in leveraged loan issuance activity in Q4 [39] - Strong performance in structured finance, particularly in U.S. CLOs and CMBS, contributed to revenue growth [39] - MA's Decision Solutions segment led with 12% ARR growth, driven by strong demand in banking, insurance, and KYC [41][42] Company Strategy and Development Direction - The company is focusing on strategic investments in technology, including Gen AI, to enhance operational efficiency and market position [13][17] - Moody's aims to capitalize on trends in private credit and transition finance, with significant investments in these areas [15][16] - The company plans to simplify its organizational structure and implement an efficiency program to enhance profitability [52][53] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing expansion of debt capital markets and the increasing pace of digital transformation [29][30] - The company anticipates continued strong demand for its services, particularly in understanding financial impacts of extreme weather events [30][34] - Management highlighted the importance of maintaining robust internal controls while pursuing growth opportunities [20][34] Other Important Information - Moody's was named the best rating agency for the thirteenth consecutive year, reinforcing its leadership position in the market [14] - The company plans to incur restructuring charges of $200 to $250 million over two years, with expected annualized cost savings of $250 to $300 million [53] Q&A Session Summary Question: Clarification on medium-term guidance and organic numbers - Management confirmed that the medium-term guidance reflects organic growth, with less reliance on M&A than initially expected [64][67] Question: Insights on MIS margins and earnings growth - Management indicated that higher incentive compensation in 2024 would provide a tailwind for margins in 2025, while continuing investments in efficiency would support long-term growth [69][72] Question: Demand environment and sales cycles in MA - Management noted that sales cycles have not changed materially, with strong new business production and retention rates in 2024 [90][91] Question: Revenue growth expectations despite ARR growth - Management explained that the difference is driven by transactional revenue dynamics, which are expected to narrow as customers migrate to the platform [94][96] Question: Impact of federal government exposure and policy changes - Management stated that federal government exposure is minimal, accounting for less than 1% of consolidated revenue, with potential impacts from policy changes being sector-specific [106][107]