Moody's Logs 1Q EPS Beat, Upgrades '13 Forecast

By Matt Egan Industries FOXBusiness

Buoyed by continued momentum in corporate debt issuance, ratings company Moody’s (MCO) beat the Street on Friday with an 8.6% leap in first-quarter profits.

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In addition to revealing results that topped forecasts, the parent of Moody’s Investors Services also raised the midpoint of its full-year earnings guidance above Wall Street’s expectations.

The company said it earned $188.4 million, or 83 cents a share, last quarter, compared with a profit of $173.5 million, or 76 cents a share, a year earlier.

Excluding one-time items, it earned 97 cents a share, easily trumping consensus calls from analysts for 87 cents.

Revenue jumped 13% to $731.8 million, narrowly surpassing the Street’s view of $729 million. U.S. revenue climbed 18% to $406.1 million, while international revenue gained 8% to $325.7 million.

“Moody's results in the first quarter of 2013 reflected strong operating performance for both Moody's Investors Service and Moody`s Analytics," CEO Raymond McDaniel said in a statement.

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Looking ahead, Moody’s now sees 2013 non-GAAP EPS of $3.49 to $3.59, up from $3.45 to $3.55 previously. The midpoint of the new range, $3.54, would top consensus forecasts for $3.51.

Management is still calling for full-year revenue to rise in the high-single-digit range, while operating expenses are now seen increasing in the mid-single-digit range.

In the first quarter, net profits were hurt by rising expenses, which jumped 19% year-over-year to $451.4 million including a litigation settlement.

Moody’s Investors Service, the company’s flagship ratings division, generated a 15% increase in revenue to $521.2 million, powered by 21% growth domestically.

Global corporate finance revenue soared 29% to $258.3 million due to “strong speculative-grade bank loan and bond issuance.” Corporate finance revenue increased 25% in the U.S. and 36% internationally.

Meanwhile, Moody’s said global revenue for its Moody’s Analytics division gained 9% to $210.6 million, including 10% domestically to $93 million.

Last month Moody’s, McGraw-Hill’s (MHP) Standard & Poor’s and Morgan Stanley (MS) settled a lawsuit over crisis-era ratings. Moody’s settled its portion of the case for $75 million.

Shares of New York-based Moody’s were inactive in Friday’s premarkets but they have soared 20% so far this year, outperforming the broader markets.