How Will Moody's (MCO) Stock Be Affected By This Downgrade?

NEW YORK (TheStreet) -- Moody's (MCO) shares were downgraded to "market perform" from "outperform" by analysts at Raymond James  (RJF), who also removed the company's $87 price target on Wednesday.

The credit ratings firm closed trading Tuesday at $89.06.

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TheStreet Ratings team rates MOODY'S CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate MOODY'S CORP (MCO) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, reasonable valuation levels, solid stock price performance and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MCO's revenue growth has slightly outpaced the industry average of 3.6%. Since the same quarter one year prior, revenues slightly increased by 4.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 47.29% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MCO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • MOODY'S CORP has improved earnings per share by 20.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MOODY'S CORP increased its bottom line by earning $3.60 versus $3.03 in the prior year. This year, the market expects an improvement in earnings ($3.98 versus $3.60).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Financial Services industry and the overall market, MOODY'S CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: MCO Ratings Report
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