Wall St. Cheat Sheet

Follow @wallstCS

Moody’s Corp Earnings Cheat Sheet: Margins Shrink as Costs Rise, Profit Falls

October 27 2011 Tweet Email This

S&P 500 (NYSE:SPY) component Moody’s Corporation (NYSE:MCO) reported its results for the third quarter. Moody’s provides credit ratings, credit and economic related research, data and analytical tools, risk management software, quantitative credit risk measures, credit portfolio management solutions, and training services.

Investing Insights: Here’s Why Chipotle’s Stock Keeps Winning.

Moody’s Earnings Cheat Sheet for the Third Quarter

Results: Net income for Moody’s Corporation fell to $130.7 million (57 cents per share) vs. $136 million (58 cents per share) a year earlier. This is a decline of 3.9% from the year earlier quarter.

Revenue: Rose 3.5% to $531.3 million from the year earlier quarter.

Actual vs. Wall St. Expectations: MCO beat the mean analyst estimate of 49 cents per share. It fell short of the average revenue estimate of $542.8 million.

Quoting Management: “Despite difficult debt issuance conditions, Moody’s achieved year-on-year revenue and operating income growth in the third quarter of 2011, with strong performance by Moody’s Analytics offsetting a modest revenue decline at Moody’s Investors Service,” said Raymond McDaniel, Chairman and Chief Executive Officer of Moody’s. “Though volatile market conditions in the U.S. and Europe may continue, we are reaffirming our 2011 EPS guidance of $2.38 to $2.48 and we expect to be at the upper end of the range.”

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the second quarter, net income rose 56.2% from the year earlier, while the figure increased 37.1% in the first quarter, 34.8% in the fourth quarter of the last fiscal year and 35.2% in the third quarter of the last fiscal year.

The company has now topped analyst estimates for the last four quarters. It beat the mark by 22 cents in the second quarter, by 14 cents in the first quarter, and by 10 cents in the fourth quarter of the last fiscal year.

Gross margin shrank 2.2 percentage points to 67.8%. The contraction appeared to be driven by increased costs, which rose 11.3% from the year earlier quarter while revenue rose 3.5%.

Revenue has risen the past four quarters. Revenue increased 26.7% to $605.2 million in the second quarter. The figure rose 21.1% in the first quarter from the year earlier and climbed 16.2% in the fourth quarter of the last fiscal year from the year-ago quarter.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the fourth quarter is 52 cents per share, down from 56 cents ninety days ago. Over the past three months, the average estimate for the fiscal year has climbed from $2.34 per to share to $2.49.

Competitors to Watch: Equifax Inc. (NYSE:EFX), McGraw-Hill (NYSE:MHP), Paychex (NASDAQ:PAYX), Automatic Data Processing (NASDAQ:ADP), Thomson Reuters (NYSE:TRI), EDGAR (NASDAQ:EDGR), FactSet Research (NYSE:FDS), ValuLine (NASDAQ:VALU), Envestnet (NYSE:ENV), Morningstar (NASDAQ:MORN) and The Dun & Bradstreet Corp. (NYSE:DNB).