Post Earnings Coverage as Moody’s Topline and Bottomline Beat Estimates

LONDON, UK / ACCESSWIRE / October 31, 2016 / Active Wall St. announces its post-earnings coverage on Moody’s Corp. (NYSE: MCO). The company reported its financial results for the third quarter fiscal 2016 (Q3 FY16) on October 21, 2016. The New York-based company reported a 10.0% and 15.0% y-o-y growth in its quarterly revenue and GAAP earnings per share, respectively; thus beating market consensus estimates. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

During the three months ended on September 30, 2016, Moody’s reported GAAP revenues of $917.1 million, up from $834.9 million recorded at the end of Q3 FY15. GAAP revenues numbers for the reported quarter outperformed market expectations of $883.7 million. The improved Q3 FY16 revenues was due to record third quarter revenue from Investor Service segment, which was driven by higher leverage finance issuance in U.S. public finance plant activity along with a solid growth for Moody’s Analytics segment.

The credit rating company reported GAAP net income of $255.3 million, or $1.31 per diluted share, in Q3 FY16, which was above $231.6 million, or $1.14 per diluted share, in Q3 FY15. Furthermore, the company’s non-GAAP net income for Q3 FY16 came in at $1.34 per diluted share compared to $1.11 per diluted share in Q3 FY15. Market analysts had forecasted adjusted earnings of $1.18 per diluted share for Q3 FY16.

Operating Metrics

For the quarter ended on September 30, 2016, the financial research company reported operating income margin of $397.5 million, or 43.3% on revenue, compared to $349.7 million, or 41.9% of revenue, in the prior year’s quarter. Furthermore, Moody’s total expense came in at $519.6 million in Q3 FY16, up 7% y-o-y, primarily attributable to increased headcount in Moody’s Analytics to support business growth. In Q3 FY16, foreign currency translation had a positive impact on expense of 2%.

Segment Performance

During Q3 FY16, Moody’s Investors Service revenue grew 12% y-o-y to $612.3 million from $548.1 million in the year ago period. The segment’s US revenue came in at $391.3 million, up 11%, while its non-US revenue was $221.0 million, up 13%.

Moody’s Analytics global revenue for Q3 FY16 came in at $304.8 million, which was 6.0% higher than the last year’s recorded revenues numbers of $286.8 million. The division’s US revenue for Q3 FY15 was $154.4 million, up 19% y-o-y; whereas non-US revenue fell 4% y-o-y to $150.4 million. In the reported quarter, foreign currency translation had an unfavorable impact on segment revenues by 3%.

Cash Flow and Balance Sheet

Moody’s reported net cash flows from operating activities of $856.6 million in the first nine months of fiscal 2016, which was below $893.5 million in the year ago period. The company’s free cash flow for the nine months ended September 30, 2016 was $771.8 million compared to $827.6 million in the prior year’s comparable quarter.

As on September 30, the company had cash and cash equivalents balance of $1.75 billion compared to $1.76 billion at the close of books on December 31, 2015. Furthermore, the company ended the quarter with total debt of $3.42 billion, up from $3.38 billion as on December 31, 2015.

Dividend and Repurchase

In a separate press release on October 18, 2016, Moody’s Board of Directors declared a regular quarterly dividend of $0.37 per share. The dividend will be payable on December 12, 2016, to stockholders of record at the close of business on November 21, 2016.

During Q3 FY16, the company repurchased 1.9 million shares worth $193.0 million at an average price of $103.00 per share. The company intends to complete repurchase of share worth approximately $750 million by the fiscal year ending December 31, 2016. Furthermore, Moody’s issued 0.8 million shares as part of its employee stock-based compensation plans in the reported quarter.

Guidance

In its guidance for full year FY16, Moody’s expects total revenue to rise in the low-single-digit percent range. The company increased its FY16 GAAP EPS guidance to the range of $4.76 to $4.86 from previously provide range of $4.70 to $4.80. The non-GAAP EPS forecast was update to the range of $4.62 to $4.72 from the September 28, 2016 guidance range of $4.55 to $4.65. Furthermore, the company expects free cash for FY16 to be approximately $1 billion.

Stock Performance

Moody’s share price finished yesterday’s trading session at $101.17, falling 0.97%. A total volume of 814.93 thousand shares exchanged hands. The stock has advanced 6.17% in the last six months and 2.04% YTD. The stock is trading at a PE ratio of 21.80 and has a dividend yield of 1.46%. Shares of the company currently have a market cap of $19.47 billion.

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