Moody’s (MCO) is set to unveil its fourth-quarter and full-year 2023 results on Feb 13, prior to market open. The company’s Corporate Finance line, the largest revenue contributor at the Moody’s Investors Service (“MIS”) division, is likely to have experienced a robust performance in the quarter.
Rising Global Issuance Activity
The global issuance activity witnessed a surge in the fourth quarter of 2023 compared to the prior-year quarter. This surge in issuance volume was further amplified by the tightening of corporate spreads in the latter half of the quarter.
The non-financial corporate bonds, including investment grade, high yield, and leveraged loans, all recorded substantial gains on a year-over-year basis. Meanwhile, while the financial institution issuance volume experienced a modest decline.
Strong Revenue Estimates
The Zacks Consensus Estimate for revenues from the Corporate Finance line indicates a significant 27.3% increase from the prior-year quarter. The robustness extends to the Financial Institutions business line as well, with a stable consensus estimate for revenues.
Positive Impact on Various Sectors
Municipal bond issuance volume also saw a notable rise, as did the quarterly issuance volumes for various securities, favorably impacting the Structured Finance revenues.
The Zacks Consensus Estimate for MIS division revenues for the quarter signifies a substantial 17.8% increase.
Management also anticipates an increase in MIS division revenues in the mid-to-high-single-digit percent range in 2023.
Other Factors Impacting Q4 Results
Moody’s Analytics (“MA”) Division: With a growing demand for analytics, revenue from all units at the MA division is expected to have surged in the third quarter. Additionally, inorganic growth strategies are likely to have supported the division’s overall revenues.
The consensus estimate for the MA division’s quarterly revenues projects an 11.5% increase from the prior-year quarter.
Moody’s foresees a 10% revenue growth for the MA division in 2023.
Expenses: The company’s inorganic growth efforts, along with restructuring costs, are expected to have driven up expenses for the quarter. Inflation is also likely to have played a role in elevating overall expenses.
Earnings Whispers and Projections
Moody’s Earnings ESP reflects a negative 2.53%, indicating low chances of exceeding the Zacks Consensus Estimate this time.
The Zacks Consensus Estimate for the company’s fourth-quarter earnings showcases a substantial 46.3% jump from the year-ago reported number, while the sales estimate suggests 15.5% year-over-year growth.
Management Guidance for 2023
Moody’s anticipates adjusted earnings to be in the range of $9.75-$10.25 per share, with revenues and operating expenses expected to increase in the high-single-digit and mid-single-digit percent ranges, respectively.
Net interest expenses and adjusted operating margin are also expected to demonstrate specific ranges.
Performance of Other Finance Stocks
Other companies in the finance sector, such as Ares Capital Corporation and The Carlyle Group Inc., also witnessed notable developments in their recent earnings reports.
Results from Ares Capital Corporation were aided by an improvement in total investment income, while The Carlyle Group Inc. saw benefits from an increase in segment fee revenues and lower expenses.
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