Moody's Corporation Reports Results for Second Quarter 2012

New York - 27 July 2012

  • 2Q12 revenue of $640.8 million up 6% from 2Q11
  • Reported 2Q12 EPS of $0.76 down 7% from 2Q11
  • Reaffirming FY 2012 EPS guidance range of $2.62 to $2.72; still expecting to be toward the upper end of the range

Moody’s Corporation (NYSE: MCO) have announced results for the second quarter 2012.

SUMMARY OF RESULTS FOR SECOND QUARTER 2012

Moody’s reported revenue of $640.8 million for the three months ended June 30, 2012, up 6% from $605.2 million for the second quarter of 2011. Expenses for the second quarter of 2012 totaled $362.3 million, 8% higher than in the prior-year period. Operating income for the quarter was $278.5 million, a 3% increase from $270.1 million for the same period last year. Diluted earnings per share of $0.76 for the second quarter of 2012 decreased $0.06 from the prior-year period, which had included a $0.06 favorable tax impact related to a foreign tax ruling and a $0.03 legacy tax benefit.

"Moody’s revenue results for the second quarter reflected solid year-on-year growth in public finance and structured finance at Moody’s Investors Service as well as continued strong results from Moody’s Analytics," said Raymond McDaniel, President and Chief Executive Officer of Moody’s. “Though market conditions remain volatile, we are reaffirming our 2012 EPS guidance range of $2.62 to $2.72 and still expect to be toward the upper end of the range.”

SECOND QUARTER REVENUE

For Moody’s Corporation overall, global revenue of $640.8 million for the second quarter of 2012 was up 6% from the second quarter of 2011. U.S. revenue of $343.8 million for the second quarter of 2012 increased 9% from the second quarter of 2011, while revenue generated outside the U.S. of $297.0 million increased 2% from the prior-year period.

Global revenue for Moody’s Investors Service (MIS) for the second quarter of 2012 was $441.2 million, about flat to the prior-year period. U.S. revenue of $258.0 million for the second quarter of 2012 increased 5% from the second quarter of 2011. Outside the U.S., revenue of $183.2 million decreased 5% from the year-ago period. Foreign currency translation unfavorably impacted MIS revenue by 3 percent.

Within MIS, global corporate finance revenue of $191.5 million in the second quarter of 2012 declined 4%, reflecting weaker speculative grade bond and bank loan issuance, against a near-record prior-year period. Corporate finance revenue was down 4% year-over-year both inside and outside the U.S.

Global structured finance revenue totaled $90.7 million for the second quarter of 2012, an increase of 5% from a year earlier. U.S. structured finance revenue grew 22% from the year-ago period, primarily due to strength in ratings of collateralized loan obligations and asset-backed securities, while non-U.S. structured finance revenue was down 9%.

Global financial institutions revenue of $77.8 million in the second quarter of 2012 decreased 2% compared to the prior-year period. U.S. financial institutions revenue was essentially flat, while non-U.S. revenue declined 3 percent.

Global public, project and infrastructure finance revenue was $81.2 million for the second quarter of 2012, an increase of 12% from the second quarter of 2011. U.S. revenue was up 19% from the prior-year period, primarily due to gains in public finance, while non-U.S. revenue declined 3 percent.

Global revenue for Moody’s Analytics (MA) for the second quarter of 2012 was $199.6 million, up 19% from the second quarter of 2011. Excluding the impact of foreign currency translation, revenue growth was 21 percent. Revenue from research, data and analytics of $121.4 million increased by 9% from the prior-year period, driven primarily by increased sales of credit research via our CreditView offering and solid growth in data licensing arrangements. Enterprise risk solutions revenue of $51.5 million was up 24% over the prior-year period, reflecting both the acquisition of Barrie & Hibbert in December 2011 and growth in the base business. Revenue from professional services of $26.7 million was up 84% from the prior-year period, reflecting the acquisition of a majority stake in Copal Partners in November 2011.

In the U.S., MA revenue of $85.8 million for the second quarter of 2012 increased 23% from the prior-year period. Outside the U.S., revenue of $113.8 million grew 17% as compared with the same quarter of 2011.

SECOND QUARTER EXPENSES

Second quarter 2012 expenses for Moody’s Corporation were $362.3 million, 8% higher than in the prior-year period, primarily due to increased headcount both from acquisitions in late 2011 and from growth in our existing business, as well as investments in technology to support both business growth and regulatory initiatives. Excluding the impact of foreign currency translation, expenses grew 10 percent. Moody’s reported operating margin for the second quarter of 2012 was 43.5%, down from 44.6% in the second quarter of 2011.

Moody’s effective tax rate was 33.6% for the second quarter of 2012, compared with 27.8% for the prior-year period. The increase in the effective tax rate was primarily due to lower taxes in 2011 resulting from a favorable foreign tax ruling.

YEAR-TO-DATE RESULTS

Moody’s Corporation revenue for the first six months of 2012 totaled $1,287.6 million, an increase of 9% from $1,182.3 million for the same period of 2011. Excluding the impact of foreign currency translation, revenue growth was 11 percent. Expenses for the first six months of 2012 totaled $740.1 million, 12% higher than a year ago. The impact of foreign currency translation was negligible. First half operating income of $547.5 million grew 5% from $520.2 million for the same period of 2011. Excluding the impact of foreign currency translation, operating income grew 8 percent. Diluted earnings per share of $1.52 for the first half of 2012 increased $0.03 from the prior-year period, which, again, had included a $0.06 favorable tax impact related to a foreign tax ruling and a $0.03 legacy tax benefit.

Revenue at Moody’s Investors Service totaled $893.9 million for the first six months of 2012, an increase of 5% from the same period in 2011. Moody’s Analytics revenue rose 19% from the first half of 2011 to $393.7 million.

CAPITAL ALLOCATION AND LIQUIDITY

During the second quarter of 2012, Moody’s repurchased 2.7 million shares at a total cost of $100.0 million and issued 0.3 million shares under employee stock-based compensation plans. Outstanding shares as of June 30, 2012 totaled 222.3 million, representing a 3% decline from a year earlier. As of June 30, 2012, Moody’s had $0.8 billion of share repurchase authority remaining under its current program. At quarter-end, Moody’s had $1.2 billion of outstanding debt and $1.0 billion of additional debt capacity available under its revolving credit facility. Total cash and cash equivalents at quarter-end were $824.1 million, a decrease of $114.4 million from a year earlier.

ASSUMPTIONS AND OUTLOOK FOR FULL-YEAR 2012

Moody’s outlook for 2012 is based on assumptions about many macroeconomic and capital market factors, including interest rates, corporate profitability and business investment spending, merger and acquisition activity, consumer borrowing and securitization, and the amount of debt issued. There is an important degree of uncertainty surrounding these assumptions, especially as they relate to Europe, and, if actual conditions differ, Moody’s results for the year may differ materially from the current outlook. Our guidance assumes foreign currency translation at end-of-quarter exchange rates.

Moody’s is reaffirming its EPS guidance range for the full-year 2012 of $2.62 to $2.72 and still expects to be toward the upper end of the range. However, certain components of 2012 guidance have been modified to reflect our current view of credit market conditions. For Moody’s overall, the Company still expects full-year 2012 revenue to grow in the low-double-digit percent range. Full-year 2012 expenses are still projected to increase in the low-double-digit percent range. Full-year 2012 operating margin is still projected to be approximately 39 percent. The effective tax rate is still expected to be approximately 33 percent.

For the global MIS business, revenue for full-year 2012 is still expected to increase in the mid- to high-single-digit percent range. Within the U.S., MIS revenue is still expected to increase in the low-double-digit percent range, while non-U.S. revenue is still expected to increase in the low-single-digit percent range. Corporate finance revenue is now projected to grow in the high-single-digit to low-double-digit percent range. Revenue from each of structured finance and financial institutions is still expected to be flat to slightly up, while public, project and infrastructure finance revenue is still expected to increase in the mid-teens percent range.

For MA, full-year 2012 revenue is still expected to increase in the high-teens percent range. Within the U.S., MA revenue is now expected to increase in the high-teens to 20 percent range, while non-U.S. revenue is still expected to increase in the high-teens percent range. Revenue growth is still projected in the mid-single-digit percent range for research, data and analytics and in the low 20’s percent range for enterprise risk solutions, reflecting the December 2011 acquisition of Barrie & Hibbert as well as growth in the base business. Professional services revenue is now projected to grow by approximately 75%, inclusive of revenue from the late 2011 acquisition of a majority stake in Copal Partners and growth in MA’s existing financial training and certification business.

Comments (0)
No one has commented on this yet. Be the first!
Add your comment - Max 1000 characters used