Solid Global Bond Issuances to Aid Moody's (MCO) Q3 Earnings

Moody's MCO is scheduled to report third-quarter 2020 results on Oct 29, before the opening bell. The company’s Corporate Finance line, the largest revenue contributor at the Moody's Investors Service (“MIS”) division, is likely to have recorded higher revenues in the quarter, owing to solid bond issuance volume.

Amid the coronavirus outbreak-led economic uncertainty, lower interest rates supported debt issuances in the to-be-reported quarter. During the quarter, investment-grade bond and high-yield bond issuance volumes witnessed substantial growth. While growth in leveraged loan issuance volumes was subdued in the quarter, revenues under the Corporate Finance line are expected to have improved year over year on the back of solid investment-grade and high-yield issuance volumes.

However, the quarterly issuance volumes for residential mortgage-backed securities and asset-backed securities were soft. Thus, growth in Structured Finance revenues is likely to have been weak.

Hence, while the MIS division’s top line is expected to have gotten support from improvement in Corporate Finance revenues, the same is likely to have been offset to an extent by the expected decline in Structured Finance revenues.

Other Factors at Play

Support from Moody's Analytics (“MA”) Division: With demand for analytics rising, revenues from all units at the MA division are expected to have increased in the third quarter. Also, the company’s efforts to strengthen the division’s profitability through inorganic growth initiatives might have offered some support. Thus, the division’s overall revenues might have risen in the to-be-reported quarter.

High Expenses: Given Moody’s inorganic growth efforts, charges related to strategic acquisition and restructuring costs might have increased in the to-be-reported quarter. Hence, overall expenses for the to-be-reported quarter are likely to have been elevated.

Earnings and Sales Growth Expectations

The Zacks Consensus Estimate for the company’s earnings of $2.19 for the to-be-reported quarter has moved 12.3% upward over the past 30 days. The figure indicates growth of 1.9% from the year-ago reported number. The consensus estimate for sales of $1.25 billion suggests a 0.6% rise.

Earnings Whispers

Our quantitative model predicts an earnings beat for Moody’s this time around. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP for Moody’s is +1.93%.

Zacks Rank: Moody’s currently carries a Zacks Rank #2 (Buy).

Moodys Corporation Price and EPS Surprise

Moodys Corporation Price and EPS Surprise

Moodys Corporation price-eps-surprise | Moodys Corporation Quote

Other Stocks to Consider

Here are a few other finance stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in their upcoming releases.

The Earnings ESP for CullenFrost Bankers CFR is +1.57% and the company carries a Zacks Rank of 3 at present. It is slated to report quarterly results on Oct 29.

Janus Henderson Group plc JHG is slated to report quarterly earnings on Oct 29. The company, which carries a Zacks Rank of 2 at present, has an Earnings ESP of +1.81%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for FS KKR Capital Corp. FSK is +0.99% and it carries a Zacks Rank #3, currently. The company is slated to announce quarterly numbers on Nov 9.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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