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Moody's Corp. Reports Operating Results (10-Q)

July 30, 2012 | About:
10qk

10qk

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Moody's Corp. (MCO) filed Quarterly Report for the period ended 2012-06-30.

Moody's Corporation has a market cap of $9.19 billion; its shares were traded at around $40.95 with a P/E ratio of 16.43 and P/S ratio of 4.03. The dividend yield of Moody's Corporation stocks is 1.56%. Moody's Corporation had an annual average earning growth of 9.8% over the past 10 years.

Highlight of Business Operations:

Moodys revenue for the second quarter of 2012 totaled $640.8 million, an increase of $35.6 million compared to the same period in 2011, primarily reflecting growth across all LOBs within MA coupled with growth in PPIF and SFG within MIS. Excluding the unfavorable impact from changes in FX translation rates, revenue in the second quarter of 2012 increased $53.8 million compared to 2011. Total expenses were $362.3 million, an increase of $27.2 million compared to the second quarter of 2011. The increase in total expenses primarily reflected both higher compensation and non-compensation costs due to the acquisition of Copal and B&H in the fourth quarter of 2011 as well as headcount growth in the Companys existing businesses. The expense growth over 2011 also reflects higher costs to support investment in the Companys IT infrastructure. Operating income of $278.5 million in the second quarter of 2012 increased 3% compared to the same period in the prior year and resulted in an operating margin of 43.5% compared to 44.6% in the second quarter of 2011. Diluted EPS of $0.76 for the second quarter of 2012 decreased $0.06 over the prior year period, which included a $0.06 favorable impact relating to a foreign tax ruling and a $0.03 benefit related to favorable resolutions of Legacy Tax Matters. Excluding the aforementioned impact relating to the favorable resolutions of Legacy Tax Matters in the second quarter of 2011, diluted EPS in the second quarter of 2012 decreased $0.03 compared to the same period in the prior year.

Global CFG revenue of $191.5 million in the second quarter of 2012 decreased $8.6 million from the same period in 2011, primarily reflecting declines in high-yield corporate debt and bank loan issuance volumes. These declines were partially offset by the favorable impacts from changes in the mix of fee type, new fee initiatives and certain pricing increases as well as higher rated issuance volumes for investment grade corporate debt, which reflects issuers opportunistically coming to market in the low interest rate environment. Transaction revenue represented 70% of total CFG revenue in the second quarter of 2012, compared to 76% in the prior year period. In the U.S., revenue in the second quarter of 2012 was $118.5 million, or $5.3 million lower than the same period in 2011. The decrease is primarily due to lower rated issuance volumes for high-yield corporate debt and bank loans partially offset by the aforementioned favorable pricing impacts. Internationally, revenue of $73.0 million in the second quarter of 2012 decreased $3.3 million compared to the same period in 2011, reflecting declines in high-yield corporate debt rated issuance volumes across most regions partially offset by higher revenue for commercial paper and medium term note programs in the EMEA region. The aforementioned global declines in high-yield corporate bond and bank loan rated issuance volumes reflect an increase in credit spreads during the second quarter of 2012 resulting from macroeconomic uncertainties in the EMEA sovereign debt markets. Unfavorable changes in FX translation rates had an approximate $5 million impact on international CFG revenue in the second quarter of 2012.

Global SFG revenue of $90.7 million in the second quarter of 2012 increased $4.4 million compared to the same period in 2011, reflecting growth in most asset classes in the U.S., partially offset by declines in most asset classes internationally. Transaction revenue was 57% and 51% of total SFG revenue in the second quarter of 2012 and 2011, respectively. In the U.S., revenue of $48.2 million increased $8.6 million compared to the second quarter of 2011, reflecting strong growth in rated issuance volumes for collateralized loan obligations and consumer asset-backed securities. The growth in both of these asset classes reflects the continued low interest rate environment as well as increased investor demand for structured products. Non-U.S. revenue in the second quarter of 2012 was $42.5 million and decreased $4.2 million compared to the same period in the prior year, primarily reflecting declines across most asset classes within the EMEA region, most notably in the covered bond asset class. The decline in covered bonds revenue is primarily due to continued macroeconomic uncertainties in the EMEA region as well as European banks increasing their use of the ECBs Long-Term Refinancing Operations program. Unfavorable changes in FX translation rates had an approximate $5 million impact on international SFG revenue in the second quarter of 2012.

Moodys revenue for the six months ended June 30, 2012 totaled $1,287.6 million, an increase of $105.3 million compared to the same period in 2011 and reflected growth in both reportable segments. Excluding the unfavorable impact from changes in FX translation rates, revenue in the six months ended June 30, 2012 increased $127.4 million compared to 2011. Total expenses were $740.1 million, and increased $78.0 million compared to the first six months of 2011 with a majority of the increase resulting from higher headcount which reflects growth in the Companys base business as well as additional personnel from the fourth quarter 2011 acquisitions of Copal and B&H . Operating income of $547.5 million in the first six months of 2012 increased $27.3 million compared to the same period in the prior year and resulted in an operating margin of 42.5% in 2012 compared to 44.0% in the prior year. Diluted EPS of $1.52 for the first six months of 2012 increased $0.03 over the prior year period, which included a $0.06 favorable impact relating to a foreign tax ruling and a $0.03 benefit related to the favorable resolution of Legacy Tax Matters. Excluding the aforementioned impact related to the favorable resolution of Legacy Tax Matters in 2011, diluted EPS in the first six months of 2012 increased $0.06 per share compared to the same period in the prior year.

Global CFG revenue of $392.0 million in the first six months of 2012 increased $10.1 million from the same period in 2011. The revenue growth reflected changes in the mix of fee type, new fee initiatives and certain pricing increases, primarily in the U.S. as well as strong growth in rated issuance volumes for investment-grade corporate bonds. The higher rated issuance volumes for investment-grade corporate debt largely reflected issuers taking advantage of the overall low interest rate environment to refinance existing borrowings. These increases were partially offset by declines in rated issuance volumes for high-yield corporate debt and bank loans reflecting continued macroeconomic uncertainties in Europe. Transaction revenue represented 72% of total CFG revenue in the six months ended June 30, 2012, compared to 76% in the prior year period. In the U.S., revenue in the first six months of 2012 was $248.5 million, or $4.0 million higher than the same period in 2011. Internationally, revenue of $143.5 million in the first half of 2012 increased $6.1 million compared to the same period in 2011. Unfavorable changes in FX translation rates had an approximate $7 million impact on international CFG revenue in the first six months of 2012.

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