Moody's stock slides after Q2 earnings miss, guidance cut on market volatility

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Moody’s (NYSE:MCO) stock is dropping 6.1% in Tuesday premarket trading after the credit ratings and financial and market information company cut its 2022 guidance as higher interest rates and market volatility reduced new debt issuances.

The company now expects FY2022 adjusted EPS of $9.20-$9.70, down from its previous range of $9.85-$10.35 and vs. average analyst estimate of $10.16. Moody’s (MCO) had also cut its year guidance when it reported Q1 results in May.

It also expects revenue to decline in the high single-digit percentage range vs. its prior view of roughly flat. Its adjusted operating margin is expected to fall to ~44% from ~47% previously and operating cash flow is seen declining to $1.7B-$1.9B from its prior guidance range of $2.1B-$2.3B.

Q2 adjusted EPS of $2.22, missing the consensus estimate of $2.33, dipped from $1.77 in the year-ago quarter.

Moody’s Corp. (MCO) Q1 revenue of $1.38B, vs. $1.43B average analyst estimate, dropped 11% from $1.55B in the year-ago quarter.

Q2 revenue for Moody’s Investors Services (“MIS”) was $706M, down from $980M in Q2 2021. The company noted that issuance, particularly for leveraged loans and high yield bonds, was dampened due to volatile market conditions.

Corporate Finance revenue of $322M slid from $550M in the year-ago quarter. Structured Finance revenue of $123M slipped from $140M. Financial Institutions revenue of $128M vs. $150M. Public, Project and Infrastructure Finance revenue was $122M vs. $130M.

Moody’s (MCO) Analytics Q2 revenue of $675M increased 18% from $573M, driven by its RMS acquisition and solid demand for Know Your Customer products and credit research.

Q2 operating expenses of $873M increased from $752M in Q1 2021.

Conference call at 12:00 PM ET.

Earlier, Moody’s non-GAAP EPS of $2.22 misses by $0.11, revenue of $1.38B misses by $50M, lowers FY EPS guidance