* Net income $173.5 million vs $155.5 million year earlier
* Q1 EPS 76 cents vs 69 cents Street view
* Expenses rise 16 percent with hiring, tech costs
* Company says outlook at 'upper-end' of full-year EPS range
By David Henry
April 26 Bond-rater Moody's Corp beat
Wall Street estimates as income rose nearly 12 percent in the
first quarter, despite an increase in costs. More bond issues
drove revenue higher.
Net income was $173.5 million, or 76 cents a share, compared
with $155.5 million, or 67 cents a share, a year earlier, the
company said in a statement on Thursday.
Analysts on average had expected a profit of 69 cents a
share, according to Thomson Reuters I/B/E/S.
While revenue from global corporate debt ratings increased
10 percent, or $19 million, the company also got a $15 million
boost to the line from work on government, project and
infrastructure finance. Revenue from public issues in the U.S.
increased 37 percent.
Moody's said it expected full-year earnings would come in
"toward the upper end" of a previously announced range of $2.62
to $2.72 per share.
But CEO Raymond McDaniel added that executives "remain
cautious about market conditions for the remainder of the year."
If the company does earn $2.72 per share this year, the result
would be 9 percent higher than last year's $2.49 a share.
Moody's shares fell 23 cents, or 0.5 percent, to $41.74 in
early afternoon trading in New York.
McDaniel said in a conference call that many of the deals
the company rated were to refinance existing debts and were
issues he had not expected to see brought to market until later
this year. He said he now expects the second half of the year
will not be as strong as the first half.
"April is running light," said Chief Financial Officer Linda
Expenses for the corporation rose by $50.8 million, or 16
percent, and the operating profit margin fell to 41.6 percent
from 43.3 percent. The company said the increase was the result
of additional hiring and spending for technology and
Higher expenses reported Tuesday by McGraw-Hill Companies
at its competing ratings company, Standard & Poor's,
hurt that company's stock price despite a rise in
profits. Both companies said that large portions of
the additional spending was to hire people to grow their
Revenue at Moody's analytics division, which sells financial
research, data and software for assessing risk, increased 18
percent from a year earlier. The division, which is intended to
stabilize the company against big swings in bond issuance,
provided 30 percent of corporate revenue in the quarter.
Bond sales by U.S. corporations in the first quarter
increased nearly 10 percent from a year earlier, according to
Thomson Reuters data.
Moody's shares have more than doubled the performance of the
broader stock market this year, climbing 25 percent through
Wednesday as the European debt crisis eased and bond issuance
rebounded from the weak volumes of late 2011.
Investors have become increasingly confident in recent
months that new regulations will not wipe out the profits of the
big rating agencies. The new regulations are a consequence of
bad ratings on mortgage-related bonds in the credit bubble. The
agencies have also been criticized by European officials over
downgrades in their countries.
Moody's said it did not buy back any stock in the quarter,
but issued 2.6 million shares to pay employees. The company said
it had 224.7 million shares outstanding at the end of March,
about 1 percent fewer than a year earlier.