Moody's Tops Q1 Earnings Estimates, Lowers 2025 View on Uncertainty

Moody's MCO reported first-quarter 2025 adjusted earnings of $3.83 per share, which outpaced the Zacks Consensus Estimate of $3.56. The bottom line grew 14% from the year-ago quarter figure.

Shares of MCO lost 1% in pre-market trading as it lowered the 2025 guidance on “market volatility.” 

Robust global bond issuance volumes and steady demand for analytics supported Moody’s results. The company’s liquidity position was strong during the quarter. However, an increase in operating expenses posed a headwind.

After considering certain non-recurring items, net income attributable to Moody's was $625 million or $3.46 per share, up from $577 million or $3.15 per share in the prior-year quarter.

MCO’s Revenues Up, Costs Rise

Quarterly revenues were $1.92 billion, which surpassed the Zacks Consensus Estimate of $1.88 billion. Also, the top line rose 8% year over year.

Total expenses were $1.08 billion, up 9% year over year. This included $33 million in charges related to the Strategic and Operational Efficiency Restructuring Program announced in the fourth quarter of 2024.

Adjusted operating income of $994 million rose 10%. Adjusted operating margin was 51.7%, rising from 50.7% a year ago.

Moody's Segment Quarterly Performance Solid

Moody’s Investors Service segment revenues grew 8% year over year to a quarterly record of $1.07 billion. The rise was driven by solid Corporate Finance and improvement in Structured Finance revenues.

Moody’s Analytics segment’s revenues also rose 8% to $859 million. Robust demand for Moody’s proprietary data and unique analytical insights contributed to this rise.

MCO’s Balance Sheet Strong

As of March 31, 2025, Moody’s had total cash, cash equivalents and short-term investments of $2.2 billion, down from $2.97 billion as of Dec. 31, 2024.

The company had $6.8 billion in outstanding debt and $1.25 billion in additional borrowing capacity under the revolving credit facility.

Update on MCO Share Repurchases

During the quarter, Moody's repurchased 0.8 million shares at an average price of $481.77.

As of March 31, 2025, approximately $1.2 billion of share repurchase authorization remained available.

Moody’s Lowers 2025 Guidance

Given the market volatility and uncertainty, Moody’s now expects adjusted earnings to be in the range of $13.25-$14.00 per share, down from the prior target of $14.00-$14.50. 

On a GAAP basis, earnings are now projected to be within $12.00-$12.75 per share, declining from earlier guidance of $12.75-$13.25. 

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

Operating expenses are expected to rise in the low-to-mid-single-digit percent range.

Our Take on Moody’s Stock

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

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 Release Dates of Other Finance Stocks

Ares Capital Corporation ARCC is scheduled to announce first-quarter 2025 numbers on April 29. (See the Zacks Earnings Calendar to stay ahead of market-making news.) 

The consensus estimate for ARCC’s quarterly earnings has remained unchanged at 54 cents over the past week. The figure implies a fall of 8.5% from the prior-year quarter.

Hercules Capital, Inc. HTGC is slated to report first-quarter 2025 results on May 1. 

The Zacks Consensus Estimate for HTGC’s quarterly earnings has remained unchanged at 46 cents over the past week. The figure implies a fall of 8% from the prior-year quarter.

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

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