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Moody's (MCO) Q1 Earnings & Revenues Beat, 2023 Guidance Up

Moody's MCO reported first-quarter 2023 adjusted earnings of $2.99 per share, which handily beat the Zacks Consensus Estimate of $2.31. The bottom line also grew 3% from the year-ago quarter figure.

Lower operating expenses and Moody’s Analytics segment’s solid performance supported Moody’s results. The company’s liquidity position was robust during the quarter. Yet, subdued issuance volume was a major headwind, which hurt Moody’s top line.

After taking into consideration certain non-recurring items, net income attributable to Moody's was $501 million or $2.72 per share, up from $498 million or $2.68 per share in the prior-year quarter.

Revenues Down, Costs Rise

Quarterly revenues were $1.47 billion, which outpaced the Zacks Consensus Estimate of $1.43 billion. The top line, however, declined 3% year over year. Foreign currency translation unfavorably impacted revenues by 2%.

Total expenses were $916 million, up 6%.

Adjusted operating income of $656 million was down 11%. Adjusted operating margin was 44.6%, down from 48.2% a year ago.

Mixed Segment Performance

Moody’s Investors Service revenues declined 11% year over year to $733 million. The fall was mainly due to muted capital market activities. Foreign currency translation affected the segment’s revenues by 1%.

Moody’s Analytics revenues grew 6% to $747 million. This was mainly driven by the steady demand for Know Your Customer solutions and credit research. Foreign currency translation unfavorably impacted the segment’s revenues by 3%.

Strong Balance Sheet

As of Mar 31, 2023, Moody’s had total cash, cash equivalents and short-term investments of $2.2 billion, up from $1.86 billion as of Dec 31, 2022.

The company had $7.5 billion in outstanding debt and $1.25 billion in additional borrowing capacity under the revolving credit facility.

Share Repurchase Update

During the quarter, Moody's repurchased 0.1 million shares at an average price of $297.30 per share.

Upbeat 2023 Guidance

Moody’s now expects adjusted earnings in the range of $9.50-$10.00 per share, up from the earlier projection of $9.00-$9.50. On a GAAP basis, earnings are now projected within $8.45-$8.95 per share, rising from the prior target of $8.05-$8.55.

Moody’s projects revenues to increase in the mid-to-high-single-digit percent range.

Operating expenses are expected to rise in the mid-single-digit percent range, an increase from the low-single-digit percent range provided previously.

Our Take

Moody’s remains well-positioned for growth on the back of a solid market position, strength in diverse operations and strategic acquisitions. However, elevated operating expenses and geopolitical and macroeconomic concerns are likely to hurt its financials.

Moody's Corporation Price, Consensus and EPS Surprise

Moody's Corporation Price, Consensus and EPS Surprise
Moody's Corporation Price, Consensus and EPS Surprise

Moody's Corporation price-consensus-eps-surprise-chart | Moody's Corporation Quote

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Currently, Moody’s carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Earnings Dates & Expectations of Other Finance Stocks

Raymond James RJF is scheduled to announce quarterly numbers on Apr 26.

Over the past 30 days, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been revised 1.8% lower to $2.17, suggesting a 40% jump from the prior-year reported number.

LPL Financial LPLA is slated to announce first quarter 2023 numbers on Apr 27.

Over the past week, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved 5% lower to $4.35, implying a 123.1% jump from the prior-year reported number.

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LPL Financial Holdings Inc. (LPLA) : Free Stock Analysis Report

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