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Moody's Corp. (MCO)
NYSE:MCO

Moody's (MCO) AI Stock Analysis

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MC

Moody's

(NYSE:MCO)

Rating:75Outperform
Price Target:
Moody's Corporation demonstrates strong financial performance and positive long-term prospects, driven by robust revenue growth and strategic investments. Despite technical analysis indicating potential short-term weaknesses and a premium valuation, the company's solid market position and focus on innovation support a favorable outlook.
Positive Factors
Financial Performance
The first quarter results were good, with revenue 8% above consensus and an adjusted EBITDA margin of 51.7%, which was higher than expected.
Private Credit Market
The company is well-positioned in private credit with continued growth and margin expansion across the enterprise.
Tech Innovation
MCO's tech innovation journey is progressing well, with strong reception for Research Assistant.
Negative Factors
Client Purchasing Patterns
Moody's Analytics business is experiencing issues as clients tighten purchasing patterns.
Issuance Guidance
Management lowered 2025 issuance guidance due to slowness observed, reflecting a more cautious outlook for the year.
Macroeconomic Environment
There is a risk that clients delay decision-making due to recent macro uncertainty and market volatility.

Moody's (MCO) vs. SPDR S&P 500 ETF (SPY)

Moody's Business Overview & Revenue Model

Company DescriptionMoody's Corporation (MCO) is a global integrated risk assessment firm that empowers organizations to make better decisions. The company primarily operates through two segments: Moody's Investors Service (MIS), which provides credit ratings, research, and risk analysis; and Moody's Analytics (MA), which offers software, advisory services, and research for financial risk management. Headquartered in New York City, Moody's is a prominent player in the financial services sector, known for its expertise in credit ratings, risk assessment, and data analytics.
How the Company Makes MoneyMoody's Corporation generates revenue through its two main business segments, Moody's Investors Service (MIS) and Moody's Analytics (MA). MIS is the company's largest revenue source, generating money by providing credit ratings and research. Issuers of debt securities, such as corporations, municipalities, and governments, pay Moody's to rate their creditworthiness, which is essential for the issuers to access capital markets. Additionally, investors and financial institutions subscribe to Moody's research and analysis for informed decision-making. The Moody's Analytics segment earns revenue by offering a suite of products and services, including risk management software, economic research, and advisory services, to financial institutions and corporations. Moody's also benefits from strategic partnerships that enhance its product offerings and expand its market reach, contributing to its overall earnings.

Moody's Key Performance Indicators (KPIs)

Any
Any
Percent of Revenue Recurring
Percent of Revenue Recurring
Shows the portion of revenue that is recurring, indicating the stability and predictability of the company's income and its ability to sustain long-term growth.
Chart InsightsMoody's saw a notable decline in the percentage of recurring revenue in early 2024, dropping from a peak in 2023. This shift may reflect the impact of market uncertainties and revised issuance guidance, as highlighted in the earnings call. Despite these challenges, Moody's is experiencing robust revenue growth and is advancing in AI and private credit solutions, which could stabilize and potentially increase recurring revenue in the future. However, external pressures like trade tensions and government contract attrition remain significant risks.
Data provided by:Main Street Data

Moody's Earnings Call Summary

Earnings Call Date:Apr 22, 2025
(Q1-2025)
|
% Change Since: 18.19%|
Next Earnings Date:Jul 29, 2025
Earnings Call Sentiment Neutral
Moody's demonstrated strong financial performance in the first quarter of 2025, with record revenue and significant growth in adjusted earnings per share. The company is making notable advancements in AI and technology, enhancing customer experiences and operational efficiency. However, the business is facing challenges due to revised issuance guidance amidst market uncertainty and trade tensions, as well as increased attrition in government contracts. While the highlights show robust growth and innovation, the lowlights indicate significant external challenges affecting future outlook.
Q1-2025 Updates
Positive Updates
Record-Breaking Revenue
Moody's achieved a record $1.9 billion in first quarter 2025 revenue, up 8% year-over-year.
Adjusted Operating Margin Improvement
Moody's adjusted operating margin reached 51.7%, an increase of 100 basis points from the previous year.
Growth in Adjusted Diluted EPS
Adjusted diluted EPS grew 14% to $3.83.
MIS Revenue and Margin Growth
MIS delivered 8% revenue growth with an adjusted operating margin of 66%, up 140 basis points.
Moody's Analytics ARR Growth
ARR growth was 9% in Moody's Analytics, led by Decision Solutions with 12% ARR growth.
Significant Private Credit Contribution
Private credit was a meaningful contributor to growth, with 143 private credit-related deals, up from 69 in the previous year.
AI and Technology Advancements
Moody's introduced new AI-driven solutions, including an AI KYC screening agent and Research Assistant, enhancing customer experiences and efficiency.
Negative Updates
Revised Issuance Guidance
MIS rated issuance is expected to decrease in the low to high single-digit range for 2025 due to market uncertainty.
Impact of Trade Uncertainty
Uncertainty regarding tariffs and trade tensions is leading to delays in customer financing and investment decisions.
Increased Attrition with US Government Contracts
Higher than expected attrition with US Government contracts is affecting ARR growth in Data and Information.
Adjustment in M&A Volume Assumptions
M&A volume growth assumptions were reduced from 50% to 15% due to trade policy uncertainty.
Company Guidance
During the Moody's Corporation First Quarter 2025 Earnings Call, the company provided updated guidance for the fiscal year amidst a volatile market environment. Moody's reported a record $1.9 billion in revenue for Q1 2025, marking an 8% increase year-over-year, with both the Moody's Investors Service (MIS) and Moody's Analytics (MA) divisions contributing equally to this growth. The adjusted operating margin improved to 51.7%, up by 100 basis points, while adjusted diluted EPS rose 14% to $3.83. The company revised its full-year 2025 guidance with MIS revenue growth now anticipated to range from flat to a mid-single-digit percent increase, and MA revenue growth expected in the high single-digit range. Despite market uncertainties, Moody's remains confident in its strategic initiatives including private credit, transition finance, and AI-driven solutions, which are expected to underpin long-term demand for its offerings.

Moody's Financial Statement Overview

Summary
Moody's financial health is robust, characterized by strong profitability and effective cash generation. The company shows a solid growth trajectory with a healthy profit margin and effective use of equity. However, reliance on debt and a slight decrease in cash flow growth are areas to monitor.
Income Statement
85
Very Positive
Moody's demonstrates strong profitability with a consistent growth trajectory. The TTM gross profit margin is robust at 69.73%, and the net profit margin is healthy at 29.15%. Revenue growth from the previous year is 21.83%, indicating solid revenue generation. EBIT and EBITDA margins are strong at 40.62% and 38.29%, respectively, reflecting operational efficiency.
Balance Sheet
70
Positive
Moody's maintains a stable financial position with a debt-to-equity ratio of 1.93, indicating reliance on debt but within manageable levels. The return on equity is impressive at 56.92%, showcasing effective use of equity to generate profits. However, the equity ratio of 24.51% suggests moderate leverage, which could pose potential risks if not managed carefully.
Cash Flow
78
Positive
The cash flow analysis highlights Moody's ability to generate substantial cash, with a free cash flow growth rate of -9.06% when comparing TTM to the previous annual report, which reflects slight decrease but remains strong. The operating cash flow to net income ratio of 1.34 and free cash flow to net income ratio of 1.23 indicate effective cash conversion from earnings.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
7.23B7.09B5.92B5.47B6.22B5.37B
Gross Profit
5.04B5.14B4.23B3.85B4.58B3.90B
EBIT
2.94B2.88B2.14B1.88B2.84B2.39B
EBITDA
2.91B3.33B2.61B2.33B3.09B2.66B
Net Income Common Stockholders
2.11B2.06B1.61B1.37B2.21B1.78B
Balance SheetCash, Cash Equivalents and Short-Term Investments
2.20B2.97B2.19B1.86B1.90B2.70B
Total Assets
15.10B15.51B14.62B14.35B14.68B12.41B
Total Debt
7.14B7.75B7.42B474.00M560.00M521.00M
Net Debt
5.00B5.34B5.29B-1.29B-1.25B-2.08B
Total Liabilities
11.24B11.78B11.15B14.35B11.76B10.65B
Stockholders Equity
3.70B3.56B3.32B2.52B2.92B1.76B
Cash FlowFree Cash Flow
2.50B2.52B1.88B1.19B1.87B2.04B
Operating Cash Flow
2.82B2.84B2.15B1.47B2.00B2.15B
Investing Cash Flow
-736.00M-1.06B-247.00M-262.00M-2.62B-1.08B
Financing Cash Flow
-2.44B-1.45B-1.58B-1.21B-122.00M-351.00M

Moody's Technical Analysis

Technical Analysis Sentiment
Positive
Last Price487.54
Price Trends
50DMA
457.00
Positive
100DMA
470.07
Positive
200DMA
472.71
Positive
Market Momentum
MACD
6.91
Positive
RSI
61.46
Neutral
STOCH
84.75
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MCO, the sentiment is Positive. The current price of 487.54 is above the 20-day moving average (MA) of 480.64, above the 50-day MA of 457.00, and above the 200-day MA of 472.71, indicating a bullish trend. The MACD of 6.91 indicates Positive momentum. The RSI at 61.46 is Neutral, neither overbought nor oversold. The STOCH value of 84.75 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MCO.

Moody's Risk Analysis

Moody's disclosed 18 risk factors in its most recent earnings report. Moody's reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Moody's Peers Comparison

Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
76
Outperform
$157.12B40.2211.68%0.73%12.98%42.72%
MCMCO
75
Outperform
$86.72B41.6557.90%0.74%15.95%26.38%
75
Outperform
$13.10B34.4325.68%0.55%10.11%79.71%
71
Outperform
$43.82B38.95-117.99%1.20%11.67%-0.89%
FDFDS
70
Outperform
$16.49B30.8828.12%0.97%4.66%11.15%
64
Neutral
$12.77B9.777.59%16985.66%12.31%-7.69%
DNDNB
57
Neutral
$4.03B-0.64%2.21%2.52%42.27%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
MCO
Moody's
487.54
86.82
21.67%
FDS
Factset Research
431.48
25.34
6.24%
SPGI
S&P Global
515.76
90.11
21.17%
MORN
Morningstar
306.66
20.37
7.12%
MSCI
MSCI
564.07
78.13
16.08%
DNB
Dun & Bradstreet Holdings
9.01
-0.36
-3.84%

Moody's Corporate Events

Business Operations and StrategyFinancial Disclosures
Moody’s Reports Strong Q1 2025 Performance
Positive
Apr 22, 2025

Moody’s Corporation reported a strong performance for the first quarter of 2025, with revenues reaching $1.9 billion, marking an 8% increase from the previous year. Both Moody’s Analytics and Moody’s Investors Service saw revenue growth of 8%, despite a 1% negative impact from foreign currency translation. The company also achieved record revenue in its Ratings franchise, driven by demand for high-quality credits and refinancing activities. Operating expenses rose by 9% due to investments, restructuring charges, and M&A activities. Moody’s updated its full-year guidance, projecting adjusted diluted EPS growth of 9% at the midpoint, reflecting its financial strength and commitment to long-term value creation amidst market volatility.

Executive/Board Changes
Moody’s Announces New Chief Accounting Officer
Neutral
Mar 11, 2025

On March 11, 2025, Moody’s Corporation announced that Caroline Sullivan, the Chief Accounting Officer and Corporate Controller, will depart from her position on April 1, 2025. Jason Phillips, who has been with the company since 2003 and has held various significant roles, will succeed her. This transition is expected to maintain stability in the company’s accounting operations, given Mr. Phillips’ extensive experience and involvement in key financial reporting and policy teams.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.