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Moody’s (MCO) to Benefit from Decent Bond Issues in Q3 – October 26, 2021

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Moody’s (AGC Free Report) is expected to release third quarter 2021 results on October 28, ahead of the opening bell. The company’s Corporate Finance line, the largest contributor to Moody’s Investors Service (“MIS”) revenue, is expected to have recorded decent revenues in the quarter to be reported.

Falling interest rates continued to support debt issuance during the quarter. While both global investment grade bond issuance volumes and high yield bond issuance volumes experienced year-over-year declines during the quarter; leveraged loan volumes recorded robust growth. Zacks’ consensus estimate for Corporate Finance line revenue is set at $ 447 million, which indicates a decline of 3% from the number reported in the previous year’s quarter.

Quarterly issuance volumes of residential mortgage-backed securities, asset-backed securities and secured debt securities were impressive. Thus, Structured Finance revenue growth would probably have been solid. The consensus estimate for the same stands at $ 126 million, which suggests a 43.2% year-over-year jump.

The consensus estimate of revenues for the Financial Institutions business line of $ 144 million implies growth of 7.5%. Zacks’ consensus estimate for public finance, project and infrastructure activity of $ 125 million suggests a 6% year-over-year decline.

The consensus estimate for the MIS division’s revenue of $ 837 million indicates a 1.5% increase over the reported figure for the previous year quarter.

Other key factors at play

Assistance to Moody’s Analytics (“MA”): With increasing demand for analysis, revenues for all units in the MA division are expected to have increased in the third quarter. The company’s efforts to bolster the division’s profitability through inorganic growth strategies should also have provided some support. Thus, the division’s overall revenues are expected to have increased in the quarter to be published.

The division’s consensus estimate of revenue of $ 593 million suggests growth of 11.7% from the figure released in the previous year’s quarter.

High expenses: In light of Moody’s inorganic growth efforts, expenses related to strategic acquisitions and restructuring costs are expected to increase in the reporting quarter. Therefore, the overall expenses are likely to have been high.

Key development during the quarter

In September, Moody’s completed the acquisition of RMS, a pioneer in climate and natural disaster risk modeling and analysis. The $ 2 billion deal, which was announced in August, will boost Moody’s insurance analytics and data business to nearly $ 500 million in revenue.

Whispers of Gains

Our quantitative model predicts an increase in earnings for Moody’s in the third quarter of 2021. Indeed, it contains the right combination of two key ingredients: a positive earnings ESP and a Zacks (Hold) rank 3 or higher.

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

ESP on earnings: The PSE of earnings for Moody’s is + 0.94%.

Zack Rank: The company currently holds a Zacks Rank # 3.

Zacks’ consensus estimate for the company’s third quarter earnings is set at $ 2.52, which has risen slightly over the past seven days. The figure indicates a 6.3% drop from the number reported a year ago.

The consensus sales estimate of $ 1.45 billion suggests a 6.9% year-over-year increase.

Other actions are worth the detour

Here are a few other financial stocks you might want to consider, as our model shows that they too have the right mix of elements to show a beaten profit this time around:

Civista Bancshares, Inc. (CIVB Free Report) is expected to release its results on October 27. The company currently holds a Zacks Rank # 2 (Buy) and has a revenue ESP of + 5.32%.

Prosperity Bancshares, Inc. (PB Free Report) is also expected to release its results on October 27. The company, which currently holds a Zacks # 3 rank, has an ESP on earnings of + 0.06%. You can see The full list of today’s Zacks # 1 Rank (Fort Buy) stocks here.

Hilltop Holdings Inc. (HTH Free Report) is expected to release its quarterly results on October 28. The company currently has an ESP on earnings of + 3.31% and a Zacks ranking of 2.


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