Moody's Profit Soars; Forecasts Strong 2013 Earnings

Friday, 08 Feb 2013 09:48 AM

 

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Credit rating agency Moody's Corp., which could face a federal lawsuit tied to pre-crisis ratings, said quarterly profit jumped 66 percent and the company forecast strong 2013 earnings.

The company has been benefiting as firms refinance debt to take advantage of rock-bottom interest rates to access cheap funding.

Moody's said it expects full-year earnings in the range of $3.45 to $3.55 per share and full-year revenue growth rate in the high single digits percent range.

Analysts on average were expecting the company to earn $3.18 per share, excluding items, according to Thomson Reuters I/B/E/S.

The growth rate at the Investor Services unit, which houses the bond rating business, is set to slow. The company forecast revenue growth at the unit in the high-single-digit percent range, compared with the 20 percent rise in 2012.

Net income rose to $160.1 million, or 70 cents per share, in the fourth quarter, from $96.2 million, or 43 cents per share, a year earlier.

Revenue rose 33 percent to $754.2 million.

Global corporate finance business rose 73 percent to $244.9 million.

EYES ON LAWSUIT

The company's stock has slumped since the U.S. government launched a $5 billion civil suit against rival Standard & Poor's and parent McGraw-Hill Companies Inc. over mortgage bond ratings tied to the financial crisis.

The U.S. Justice Department and multiple states are discussing suing Moody's for defrauding investors, Reuters reported on Thursday, citing people familiar with the matter, but any such move will likely wait until the lawsuit against S&P is tested in the courts.

Moody's is already facing fraud claims filed by private investors.

Abu Dhabi Commercial Bank, King County in Washington state, and other investors are suing the firm over losses in Cheyne, a structured investment vehicle. That trial is scheduled to start in May.

Moody's and S&P have long faced criticism from investors, politicians and regulators for assigning high ratings to thousands of subprime and other mortgage securities that quickly turned sour.

The company's shares rose 2 percent to $47.95 in trading before the bell. They closed at $46.99 on the New York Stock Exchange on Thursday.

© 2014 Thomson/Reuters. All rights reserved.

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