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Moody's Corporation

Moody’s posts 66% Q4 profit rise, 2013 EPS guidance tops views

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Ratings agency Moody's (NYSE:MCO) Friday posted a 66-per-cent rise in fourth quarter earnings as it benefited from a from a stronger corporate debt market and said it expects full-year 2013 revenue to grow in the high-single-digit percent range. 

For the three months that ended December 31, net income rose to $160.1 million or 70 cents per diluted share, from $96.2 million or 43 cents per share, a year earlier. 

Operating income for the quarter was $260.2 million, up 51 per cent, while adjusted operating income was $296.2 million, up 54 per cent. 

Revenue increased 33 per cent to $754.2 million, from $567.1 million in the year-ago quarter.

Analysts polled by Thomson Reuters had called for per share earnings of 69 cents on revenue of $683.34 million.

"Moody's delivered strong financial performance throughout 2012, with double-digit revenue growth in most lines of business," said president and CEO Raymond McDaniel. 

"Despite ongoing economic uncertainty, we anticipate generally favorable market conditions to remain in place in 2013. 

“As a result, Moody’s expects revenue growth across all areas of the business, as well as earnings per share in the range of $3.45 to $3.55."

Analysts are expecting full-year 2013 per share earnings of $3.18.

U.S. revenue of $400.9 million increased 40 per cent year-over-year, and revenue generated outside the U.S. increased 26 per cent to $353.3 million.

The company noted that revenue generated outside the U.S. represented 47 per cent of total revenue, down from 50 per cent a year earlier.

Global revenue for Moody’s Investors Service (MIS) was up 42 per cent to $519.4 million, with U.S. revenue increasing 49 per cent and revenue outside the U.S. up 32 per cent.

Within MIS, global corporate finance revenue increased 73 per cent, reflecting strong issuance in both investment-grade and speculative-grade markets, Moody’s said.

Global structured finance revenue was up 18 per cent, on a 50-per-cent increase in the U.S., due to strength in ratings of commercial mortgage-backed securities and collateralized loan obligations. Non-U.S. structured finance revenue fell nine per cent.

Global financial institutions revenue increased 29 per cent, on increased banking issuance, the company noted. 

Global public, project and infrastructure finance revenue grew 19 per cent, primarily due to gains in project finance and growth in infrastructure finance in Europe.

Global revenue for Moody’s Analytics (MA) was up 17 per cent. Moody’s said that revenue from research, data and analytics increased by nine per cent, on “solid growth” from MA’s CreditView offering and strong customer retention. 

Fourth quarter operating expenses were $494.0 million, 25 per cent higher than in the prior-year period, primarily due to higher accruals for incentive compensation and Moody’s profit sharing plan, as well as incremental legal defense costs. 

Moody's is facing fraud claims filed by Abu Dhabi Commercial Bank, King County in Washington State, and other investors, who are suing the firm over losses in Cheyne, a structured investment vehicle. That trial is scheduled to start in May.

Earlier this week, the U.S. government launched a $5 billion civil suit against Moody’s rival Standard & Poor's and parent McGraw-Hill Companies Inc over mortgage bond ratings tied to the financial crisis.

According to a Reuters report, the U.S. Justice Department and multiple states are discussing suing Moody's for defrauding investors, but that would likely not come until the lawsuit against S&P is tested in the courts.

At year-end, the company said it had $1.7 billion of outstanding debt and $1.0 billion of additional debt.

Looking ahead, Moody’s expects global MIS revenue for full-year 2013 to increase in the high-single-digit percent range. 

For Moody's Analytics, full-year revenue is expected to increase in the high-single-digit percent range. 

Shares of the company were down 0.79 per cent in premarket activity, trading at $46.62.

 

Quick facts: Moody's Corporation

Price: $214.08

Market: NYSE
Market Cap: $40.5 billion
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