Moody's missed average analyst expectations as weaker revenue in the ratings unit clipped performance. For the quarter ended Sept. 30, the firm posted net income of $734 million, or $4.24 per diluted share, compared with $646 million and $3.60 per share a year earlier. On an adjusted basis, profit came in at $4.14 per share, shy of the $4.27 median estimate compiled by Bloomberg.
Revenue at Moody's Investors Service was $1.087 billion, roughly 1% lower than a year earlier and short of the $1.132 billion analysts penciled in. Results were pressured by softer ratings revenue as higher yields cooled corporate bond issuance.
The stock swung lower by up to 4.1% before turning higher by as much as 2% and later settling. Jeff Silber of BMO Capital Markets said leadership remained "very bullish" even with the third quarter misses, noting that guidance for the rest of the year on key metrics - such as per-share earnings and free cash flow - was left intact.
Chief executive officer Robert Fauber said that sales of debt tied to artificial intelligence were not the sole catalyst for ratings activity. He highlighted that rated private credit deals increased by more than 40% from a year earlier, and noted the company uses the same analysts across private and public credit. "I want to be agnostic to whether it's private credit funding or public credit funding," he said.
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Wells Fargo's Jason Haas and Keegan Antico kept an overweight rating, arguing the analytics arm - which sells data and economic research - helps balance swings in ratings. They cautioned that a slower pace of new deals and the possibility that elevated interest rates could raise refinancing costs for speculative grade borrowers are key risks. The bottom line: steadier analytics plus disciplined guidance may buffer volatility, but issuance sensitivity still matters for your portfolio.
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