Moody’s reported fourth-quarter earnings in line with expectations, but missed revenue estimates.
Moody’s (MCO 2.98%), a provider of credit ratings, research, and risk analysis, recently unveiled its earnings for the fourth quarter of 2024 on Feb. 13, 2025. The company’s earnings were highlighted by an Adjusted Diluted EPS of $2.62, aligning with market expectations. However, its revenue of $1.7 billion fell short of the anticipated $1.71 billion, suggesting potential hurdles in its topline performance. Overall, the quarter showcases solid earnings amid a slight revenue shortfall.
| Metric | Q4 2024 | Q4 Estimate | Q4 2023 | Y/Y Change |
|---|---|---|---|---|
| Adjusted EPS | $2.62 | $2.62 | $2.19 | +20.0% |
| Revenue | $1.7B | $1.71B | $1.48B | +13.0% |
| Operating Margin | 33.6% | N/A | 33.6% | +0.0 pp |
| Net Income | $395M | N/A | $340M | +16.2% |
Source: Analyst estimates for the quarter provided by FactSet.
Moody’s Business Overview
Moody’s operates through two main segments: Moody’s Analytics (MA) and Moody’s Investors Service (MIS). MA provides integrated services for risk management, delivering financial intelligence and tools that aid in regulatory compliance. MIS is renowned for offering credit ratings, playing a pivotal role in helping issuers and investors to navigate financial markets. Recently, the company has shifted focus toward enhancing technological capabilities, specifically in AI and data analytics, to boost service offerings and improve internal operations.
The company’s progress in integrating AI into its analytics has positioned it well for future growth.
Quarterly Developments
During the fourth quarter, Moody’s recorded a revenue of $1.7 billion, representing a 13% year-over-year increase. Despite this growth, revenue did not meet the anticipated $1.71 billion, reflecting complexities within certain business segments. Moody’s Analytics posted an 8% rise in revenue to $863 million, with strong contributions from banking and insurance segments. Meanwhile, MIS saw an impressive 18% growth to $809 million, fueled by a 29% spike in transactional revenue attributed to higher corporate finance activities.
The stable operating margin at 33.6% and a 20% increase in Adjusted Diluted EPS highlight Moody’s ability to manage its operational expenses effectively. These results align with its strategic focus on operational efficiency amid slight revenue discrepancies. Moody’s has attributed some of these discrepancies to underperformance in areas transitioning to newer SaaS-based systems which involve up-front costs and adaptations.
Key market trends rendered a favorable environment for Moody’s, albeit economic uncertainties such as inflation and interest rate fluctuations. Moody’s dividend declarations continued, marking ongoing shareholder commitment with dividends increasing to $0.94 per share.
Looking Ahead
Looking forward to 2025, management forecasts a high-single-digit growth in revenue with an Adjusted Diluted EPS range between $14.00 and $14.50. Moody’s remains optimistic about leveraging favorable market conditions through strategic execution in both its segments.
In light of these forecasts, investors should monitor any potential impacts stemming from macroeconomic factors such as U.S. interest rates or ESG regulatory developments. Moody’s focus on innovation and anticipated macroeconomic stability offers a promising backdrop for future performance. However, scrutiny of evolving market trends and regulatory landscapes will be crucial in the quarters ahead.
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