Moody’s ((MCO)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Moody’s Corporation has reported a robust financial performance in 2024, marked by significant revenue and earnings growth. The earnings call reflected a predominantly positive sentiment, highlighting the strength of both Moody’s Investor Service and Moody’s Analytics. Despite some challenges in transactional revenue and the necessity for restructuring, the company made strategic investments and acquisitions that enhanced its offerings and achieved notable recognitions. Overall, the positive elements of the report far surpassed the negatives.
Record-Breaking Revenue and Growth
Moody’s achieved a remarkable year in 2024, with a 20% increase in revenue, totaling over $7 billion. This growth was accompanied by a 26% rise in adjusted diluted EPS and an expansion of the adjusted operating margin by over 400 basis points, setting new records for the company.
Strong Performance in Moody’s Investor Service (MIS)
Moody’s Investor Service delivered a strong performance with an 18% total revenue growth. Notably, transactional revenue saw a 29% increase in Q4. The ratings team contributed significantly with a 33% revenue growth and over 500 basis points of adjusted operating margin expansion for the full year.
Moody’s Analytics Growth
Moody’s Analytics reported a 10% growth in recurring revenue in Q4, driven by Decision Solutions, which achieved $1.4 billion in annualized recurring revenue (ARR) growing at a 12% rate, underscoring the division’s robust performance.
Notable Achievements and Recognitions
The company was named the best rating agency for the thirteenth consecutive year by Extell. Additionally, Moody’s issued nearly 400 private credit-related transactions and expanded Moody’s Local into six more Central American countries, with revenues up 16%.
Strategic Investments and Acquisitions
Moody’s made strategic acquisitions, including Numerated, CreditCat, and Tape Analytics, in the last six months. These acquisitions enhanced the company’s product offerings across banking, insurance, and property analytics, positioning Moody’s for future growth.
Challenges in Transactional Revenue
Despite robust issuance, the growth in transactional revenue did not meet expectations, primarily due to the high proportion of bank loan repricings, which have different economic implications compared to other types of transactions.
Headwinds in Research and Insights
The research and insights segment experienced some challenges due to attrition events from the asset manager space, impacting growth rates. However, sales growth remained higher than ARR trends, indicating resilience in this area.
Restructuring and Efficiency Program
To enhance organizational efficiency, Moody’s announced a restructuring program with expected charges of $200 to $250 million over two years, mainly in personnel-related costs, aiming to simplify operations and improve efficiency.
Forward-Looking Guidance
Looking ahead to 2025, Moody’s expects high single-digit revenue growth, with an adjusted operating margin expansion of approximately 200 basis points to around 50%. MIS is projected to achieve mid to high single-digit revenue growth with a 62% to 63% adjusted operating margin. Moody’s Analytics is anticipated to reach high single-digit revenue growth, with ARR growth in the high single-digit to low double-digit range. The company aims for $250 million to $300 million in annualized cost savings through its efficiency program and plans to focus on private credit, transition finance, and investments in generative AI.
In conclusion, Moody’s earnings call reflected a strong financial performance, with the company achieving significant revenue and earnings growth in 2024. Strategic investments and acquisitions have positioned the company well for continued success, despite some challenges in transactional revenue and research insights. The forward-looking guidance for 2025 suggests sustained growth and efficiency improvements, highlighting Moody’s strategic focus on evolving market demands.
