Tags: Moodys | profit | ratings | demand

Moody’s Profit Beats Estimates on Demand for Company Ratings

Friday, 03 May 2013 09:33 AM

 

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Moody’s Corp., the second-largest credit rater, reported first-quarter profit that beat analysts’ forecasts on demand for company ratings.

Net income rose to $188.4 million in the three months ended March 31, from $173.5 million a year earlier, New York-based Moody’s said in a statement distributed by Business Wire. Earnings excluding certain items were 97 cents a share, surpassing the average estimate of 87 cents in a Bloomberg survey of seven analysts.

Moody’s has reported profit increases for three straight years as companies take advantage of record-low interest rates to sell unprecedented amounts of debt. While the pace of corporate bond issuance worldwide slowed in the first quarter, Moody’s increased its share of revenue in the market.

The company said revenue increased 13 percent to $731.8 million for the first three months of the year, from $646.8 million a year earlier. Its credit-rating unit, Moody’s Investors Service, accounted for $521.2 million of the total. Corporate debt ratings revenue increased 29 percent to $258.3 million, the company said in the statement.

Moody’s full-year net income of $690 million last year was the most since 2007, when structured-finance grades made up 39 percent of revenue. The market for complex mortgage-backed securities deteriorated that year with the collapse of the housing market and start of the credit crisis.

Lawsuit Settled

Moody’s, which helped start the business of ranking companies by their ability to repay debt in 1909, settled a lawsuit last month that claimed its grades weren’t objective when rating structured investment vehicles. The company climbed to the highest level in more than five years after investors led by Abu Dhabi Commercial Bank and King County, Washington, agreed to drop their claims.

The company included a 14-cent litigation settlement charge that reduced its earnings per share to 83 cents, reflecting “higher-than-anticipated expenses associated with our resolution of two protracted litigation matters,” Chief Executive Officer Raymond McDaniel said in the statement.

Moody’s shares have climbed 53 percent in the past year to $60.55 through yesterday. Warren Buffett’s Berkshire Hathaway Inc., the company’s biggest shareholder, reduced its holdings this week by 1.75 million shares from prices ranging from $59.93 to $60.94, according to a May 1 regulatory filing.

Bond Sales

Corporate bond issuance worldwide fell 7.5 percent to $1.09 trillion in the first three months of the year from $1.17 trillion in the same period of 2012, according to data compiled by Bloomberg.

Revenue at Standard & Poor’s, the biggest credit rater, climbed 20.4 percent during the period to $561 million on what Chief Executive Officer Harold “Terry” McGraw called “resurgence” in structured finance, the New York-based unit of McGraw Hill Financial said April 30.

© Copyright 2014 Bloomberg News. All rights reserved.

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