Moody’s (NYSE:MCO) Q3 2020 Earnings Prep

in EARNINGS/INVESTING IDEAS by

Moody’s Corporation (NYSE:MCO) is scheduled to report Q3 earnings results on October 29, 2020.

The company is expected to report earnings of $2.11/share on revenue of $1.228 billion. The consensus earnings per share (EPS) of $2.11/share is based on a poll of 14 analysts and represents a decline in eps of −2.0% over the same quarter last year, when the company reported earnings of $2.15/share.

The revenue forecast of $1.228 billion based on a poll of 12 analysts implies a year-over-year (YoY) decline in revenue of −1.0%. Last year the company reported $1.24 billion in revenue for the quarter.

Expected to report EPS contraction of −2.0% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $1,228.17 $1,240.50 −1.0%
EPS $2.11 $2.15 −2.0%

Earnings Call Trends

Historically, management has exceeded analyst expectations 6 out of the last 8 tracked quarters, and missed expectations 2 quarters.

What are your expectations from Moody’s Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $2.20 $2.81 28.0% Beat
Q1, 2020 $2.24 $2.73 22.0% Beat
Q4, 2019 $1.92 $2 4.2% Beat
Q3, 2019 $1.99 $2.15 7.9% Beat
Q2, 2019 $2.01 $2.07 2.9% Beat
Q1, 2019 $1.94 $2.07 6.8% Beat
Q4, 2018 $1.68 $1.63 −2.9% Missed
Q3, 2018 $1.78 $1.69 −5.2% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −3.5%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 30, 2020 $291.36 $281.30 −3.5% Decline
April 30, 2020 $254.98 $241.84 −5.2% Decline
February 12, 2020 $270.99 $272.77 0.7% Increase
October 30, 2019 $220.40 $220.69 0.1% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.44, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.44 implies a 0.7% chance of earnings manipulation.

Fundamentals And Technical Analysis

Moody’s Corporation is currently trading at $269/share, down −1.1% for the day. The company is trading at approximately 87.9% of its 52-week high of $305.95/share. The company’s stock price is down −4.4% since the last earnings report and down −5.7% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 28.61 suggests the company is trading in technically oversold territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:MCO Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 29.08 and a forward P/E multiple of 28.72.

Moody’s Corporation’s current share price also implies a price-to-book (P/B) multiple of 48.50. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $269
P/E Ratio 29.1x
P/E Ratio (Fwd) 28.7x
PEG Ratio 0.7
Total Debt / Total Capital 11.9%
Levered Free Cash Flow $1.805 billion
EV / EBITDA 21.4x

Finbox

Moody’s Corporation is a large-cap stock with a market capitalization of $50.49 billion and a total enterprise value of $55.374 billion. The company operates in the Financials sector and the Capital Markets industry.

Moody’s Corporation provides credit ratings and assessment services; and credit, capital markets, and economic research, data, and analytical tools worldwide. It operates through two segments, Moody’s Investors Service and Moody’s Analytics. The Moody’s Investors Service segment publishes credit ratings and provides assessment services on various debt obligations and entities that issue such obligations, such as various corporate and governmental obligations, structured finance securities, and commercial paper programs. This segment provides ratings in approximately 130 countries. Its ratings are disseminated through press releases to the public through print and electronic media, including the Internet and real-time information systems used by securities traders and investors. As of December 31, 2019, this segment had ratings relationships with approximately 4,900 non-financial corporate issuers; 4,100 financial institutions issuers; 17,200 public finance issuers; and 1,000 infrastructure and project finance issuers, as well as 9,500 structured finance transactions. The Moody’s Analytics segment develops a range of products and services that support financial analysis and risk management activities of institutional participants in financial markets; and offers subscription based research, data, and analytical products comprising credit ratings, credit research, quantitative credit scores and other analytical tools, economic research and forecasts, business intelligence and company information products, and commercial real estate data and analytical tools. It also offers software solutions, as well as related risk management services; and offshore analytical and research services with learning solutions and certification programs. The company was formerly known as Dun and Bradstreet Company and changed its name to Moody’s Corporation in September 2000. Moody’s Corporation was founded in 1900 and is headquartered in New York, New York.

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