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Moody's Q2 profits beat the Street, shares rally

Moody's Q2 profits beat the Street, shares rally

Ratings agency Moody's Corp (NYSE:MCO) Thursday posted second quarter results that beat Street estimates, even as fewer bonds were sold worldwide and as worries over the eurozone debt crisis affected issuance plans.

Shares rose 10.18 per cent on the news, trading at $39.72 as at 2 pm ET.

For the three months that ended June 30, net income declined eight per cent to $172.5 million, or 76 cents per diluted share, from $189 million or 82 cents per diluted share, a year earlier.

Revenue of $640.8 million for the second quarter was up 5.8 per cent from $605.2 million in the second quarter of 2011.

Analysts had forecast earnings of 70 cents, on revenue of $632.14 million, according to Thomson Reuters.

“Moody’s revenue results for the second quarter reflected solid year-on-year growth in public finance and structured finance at Moody’s Investors Service as well as continued strong results from Moody’s Analytics,” said president and CEO Raymond McDaniel.

“Though market conditions remain volatile, we are reaffirming our 2012 EPS guidance range of $2.62 to $2.72 and still expect to be toward the upper end of the range.”

Second quarter expenses were $362.3 million, eight per cent higher than in the prior-year period, on increased headcount both from acquisitions in late 2011 and from growth in existing business.

Excluding the impact of foreign currency translation, Moody’s said expenses grew 10 per cent.

Moody’s reported operating margin for the second quarter was 43.5 per cent, down from 44.6 per cent in the second quarter of 2011.

Global revenue for the company’s Moody’s Investors Service (MIS) unit was $441.2 million, about flat to the prior-year period.

Within MIS, the company noted that US revenue of $258.0 million for the quarter increased five per cent from a year earlier. Outside the US, revenue of $183.2 million decreased five per cent from the year-ago period.

Foreign currency translation unfavorably impacted MIS revenue by 3 percent.

Global structured finance revenue totaled $90.7 million for the second quarter, an increase of five per cent from a year earlier.

Moody’s said that revenue from global financial institutions was $77.8 million in the second quarter, down two per cent compared to the prior-year period.

Revenue from global public, project and infrastructure finance was $81.2 million, an increase of 12 per cent from the second quarter of 2011.

Global revenue for Moody’s Analytics (MA) for the second quarter was $199.6 million, up 19 per cent from a year earlier.

Looking ahead, the company said it still expects full-year 2012 revenue to grow in the low-double-digit per cent range.

Moody’s is the parent company of Moody's Investors Service, which provides credit ratings and research covering debt instruments and securities, and Moody's Analytics, which offers software, advisory services and research for credit and economic analysis and financial risk management.

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