Moody's Posts Big Quarter as Ratings Revenue Rises - TheStreet

Moody's Posts Big Quarter as Ratings Revenue Rises

It beats estimates by 10 cents a share.
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Moody's

(MCO) - Get Report

reported a 28% increase in second-quarter profits, helped by the favorable impact of currency translation and low interest rates.

Results easily beat analysts' projections, and the company forecast full-year earnings also ahead of analysts' consensus.

In the quarter ended June 30, New York-based Moody's earned $100.9 million, or 66 cents a share, compared with $78.7 million, or 49 cents a share, last year. Results included a charge of a penny a share related to the company's decision to start expensing stock options in 2003.

Analysts were expecting 56 cents a share in the quarter. The company said operating income was $176.7 million, up from last year's $147.0 million.

Total sales were $312.7 million, an increase of 15% from last year's $271.5 million. The current quarter's revenue included KMV, which the company bought in April 2002. Moody's said currency translation contributed about 250 basis points to revenue growth for the quarter.

Moody's Investors Service global ratings revenue was $256.4 million in the quarter, up 12% from $228.5 million a year ago. U.S. revenue was $209.4 million and up 16% from the second quarter of 2002 on a reported basis.

Full-year 2003 EPS is seen in the range of $2.18 to $2.24, before items, the company said. Analysts expect $2.10 a share. On a reported basis, EPS is expected to be $2.19 to $2.25, including an insurance gain of 5 cents a share and an expense of 4 cents a share related to expensing stock-based compensation plans.

The company also noted that the long-term drivers of economic activity, debt issuance and business investment were weak in the second quarter and that it does not see significant improvement in 2003. The company expects that revenue growth will be in a double-digit to low-teen percentage range on a pro forma basis in 2003. On a reported basis, the company sees revenue growth in the low-teens range.

"Growth in our nonratings businesses, which are not interest rate sensitive, should help Moody's continue to grow when interest rates eventually rise," the company said in a statement.

Moody's also said it increased its expectations for full-year 2003 structured finance revenue growth to the low double-digits percent range. In the U.S. specifically, residential mortgage refinancings have not fallen as quickly as previously anticipated, and the company said declines in related securitizations might not happen until the last half of the year or until 2004.

Shares of the company were recently up 22 cents, or 0.4%, to $52.99.