Solid Leverage Loan Issuance to Support Moody's Q1 Earnings

Moody's MCO is scheduled to announce first-quarter 2025 results on April 22, before the opening bell. The company’s Corporate Finance line, the largest revenue contributor at the Moody's Investors Service (“MIS”) division, is likely to have witnessed marginal revenue growth.

Global issuance activity was mixed in the first quarter due to widening spreads amid an elevated interest rate environment, tariff-related concerns and lingering geopolitical uncertainties.

Two of the three sub-categories within non-financial corporate bonds (investment-grade loans and high yield) witnessed lower volumes on a year-over-year basis, while leveraged-loans issuance was robust, driven by repricing activity. The Zacks Consensus Estimate for revenues from the Corporate Finance line of $532.3 million indicates a marginal rise from the prior-year quarter’s reported number.
 
The consensus estimate for revenues from the Financial Institutions business line of $201.1 million suggests a 3.1% increase. The Zacks Consensus Estimate for Public, Project and Infrastructure Finance business revenues of $141.2 million implies a slight increase.

Quarterly issuance volumes for commercial mortgage-backed securities and collateral debt obligations were robust. On the other hand, asset-backed securities issuance was down during the to-be-reported quarter. Hence, Structured Finance revenues are likely to have been favorably impacted. The consensus estimate for the same stands at $116.8 million, suggesting a 2.5% rise.

The Zacks Consensus Estimate for MIS division revenues for the to-be-reported quarter of $1.1 billion implies a 7.3% year-over-year increase.

Moody’s Other Key Factors & Estimates for Q1

Moody's Analytics (“MA”) Division: With demand for analytics rising, revenues from all units at the MA division are expected to have increased in the first quarter. The company’s efforts to strengthen the division’s profitability through inorganic growth strategies are anticipated to have offered some support. Thus, the division’s overall revenues are likely to have risen in the to-be-reported quarter.

The consensus estimate for the MA division’s quarterly revenues is pegged at $868.4 million, indicating an 8.7% increase from the prior year quarter.

Expenses: Given Moody’s inorganic growth efforts, charges related to strategic acquisitions and restructuring costs, overall expenses are expected to have increased in the to-be-reported quarter.

Earnings Whispers for Moody’s

According to our proven model, the chances of Moody’s beating the Zacks Consensus Estimate for earnings this time are low. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Moody’s is -0.38%.

Zacks Rank: The company currently carries a Zacks Rank #3.

Q1 Earnings and Sales Expectations for MCO

The Zacks Consensus Estimate for earnings is pegged at $3.57, which has been revised marginally upward over the past seven days. The figure indicates a 5.9% rise from the year-ago reported number. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Moody's Corporation Price and EPS Surprise

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

The consensus estimate for sales of $1.89 billion suggests 5.7% growth.

Other Finance Sector Stocks Worth a Look

Here are a couple of other finance sector stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time:

State Street STT has an Earnings ESP of +1.21% and it carries a Zacks Rank #3 at present. The company is slated to report first-quarter 2025 results on April 17. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past seven days, the Zacks Consensus Estimate for STT’s quarterly earnings has been revised marginally downward to $1.98.

First American Financial Corporation FAF is scheduled to release first-quarter 2025 earnings on April 23. The company has an Earnings ESP of +0.28% and a Zacks Rank #3.
 
Quarterly earnings estimates for FAF have remained unchanged at 67 cents over the past week.

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This article originally published on Zacks Investment Research (zacks.com).

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