Moody’s Corporation Provides Solid Fourth Quarter Results And Guidance

MCOMoody’s (NYSE:MCO) reported this morning stronger-than-expected fourth-quarter results. Management’s revenue guidance for 2015 was a touch less than the consensus, but EPS guidance was in line with expectations.

Looking first at the fourth-quarter results, EPS of $1.12 were $0.17 above the consensus. EPS benefited by $0.11 from a lower-than-expected tax rate and $0.06 from foreign-exchange gains shown in “other income,” but were hurt by a few pennies from higher minority interest. Higher-than-expected operating income contributed about $0.03-$0.04 of upside for the quarter. This upside came from stronger-than-expected revenue in MIS’s corporate finance practice, MIS’s structured products practice, and the ERS practice within Moody’s Analytics. Fourth-quarter revenue increased 13% year-over-year, to $878 million. This result was about $29 million above the consensus estimate. U.S. revenue grew 15% year-over-year, while international revenue grew 10% year-over-year, although currency translation hurt revenue growth by a few hundred basis points.

During the fourth quarter, Moody’s generated $308 million in cash from operations, compared with $273 million in the year-ago period. Capital expenditures were $18 million in the fourth quarter, so free cash flow was $291 million, compared with $262 million in the year-ago period. The company repurchased 4.6 million shares for $440 million during the fourth quarter, leaving about $1.6 billion of availability under its current repurchase authorization. At year end, the company’s share count was about 4% lower than at the start of the year. The company exited the quarter with $1.7 billion in cash and short-term investments and $2.5 billion of debt, resulting in net debt of about $0.8 billion.

For 2015, management provided an initial EPS guidance range of $4.55-$4.65, which is in line with the consensus estimate of $4.57. Management’s guidance assumes mid-single-digit growth in both the Ratings and MA segments, as well as relatively flattish profit margins for the overall company. The company’s mid-single-digit revenue growth guidance is a little below the consensus projection for about 7% growth.

Shares of Moody’s Corporation opened today at $96.00 and are currently trading up at $97.70. MCO has a 1-year high of $102.24 and a 1-year low of $74.36. The stock’s 50-day moving average is $94.45 and its 200-day moving average is $94.62.


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