* Q1 EPS 67 cents vs Street view 54 cents
* Raises 2011 EPS view to $2.22-$2.32
* Boosts quarterly dividend to 14 cents a share
* Shares close up 6.7 percent
(Adds details on Fed bond buying and rates plan; updates
By Clare Baldwin and David Henry
NEW YORK, April 27 Bond rating company Moody's
Corp (MCO.N) posted a 37 percent rise in first-quarter profit,
topping Wall Street expectations, as corporate debt issuance
The company also raised its quarterly dividend and
increased its full-year earnings forecast and the news sent
Moody's shares up 6.7 percent.
But the uptick in issuance might not last, an analyst
The first-quarter results included a surprise increase in
structured finance ratings -- a business that has been troubled
since the financial crisis -- due to a new European regulatory
requirement for a second rating opinion on some outstanding
And the main source of the Moody's ratings business, its
corporate bond ratings, could slow.
"My sense is that a lot of this (corporate finance
business) has been refinancing churn in the U.S. and that is
starting to run its course," said Douglas Arthur, an analyst at
Arthur, who cut his rating on Moody's stock to
"equal-weight" from "buy" before the earnings news, said the
wave of U.S. corporate refinancing could slow before capital
expenditures, leveraged buyouts and mergers and acquisitions
pick up. Business from Europe has been dampened by sovereign
debt crises, he said.
Moody's raised its full-year guidance based on a strong
Analysts on average expected Moody's to report
first-quarter earnings of 54 cents a share, according to
Thomson Reuters I/B/E/S.
The company beat that by 13 cents, posting earnings of 67
cents per share, up from 47 cents a year earlier.
It raised the midpoint of its full-year earnings outlook by
10 cents -- it now expects 2011 earnings of $2.22 to $2.32 per
share, up from a previous forecast of $2.12 to $2.22.
It increased its quarterly dividend to 14 cents a share
from 11.5 cents.
Moody's shares closed up $2.40 at $38.31 on the New York
A GOOD TIME TO REFINANCE?
Low global interest rates are prompting companies to
refinance their debt and pushing investors to take more risk on
higher-yielding corporate bonds.
The Federal Reserve on Wednesday confirmed it will finish
out its $600 billion bond buying program in June, but repeated
its plan to keep rates low for an "extended period."
McGraw-Hill Cos Inc MHP.N, which houses rival ratings
agency Standard & Poor's, beat Street earnings estimates on
Tuesday, also because of strong bond issuance. [ID:nN26251951]
S&P estimated there will be $1.2 trillion to $1.5 trillion
of U.S. and European bond and loan maturities to refinance
annually from 2011 to 2014.
Moody's Investors Service, the ratings agency business at
Moody's Corp, saw its revenue rise 23 percent to $412.6 million
in the first quarter. Most of the gains came from rating
corporate bonds, but there were also gains in long-troubled
Moody's said revenue from rating global structured finance
instruments increased 25 percent from a year earlier to $89.4
million. Despite the surge, the business is still a fraction of
what it was at the peak of the credit boom. In the last quarter
of 2006, structured finance generated $275.6 million of
revenue, half of Moody's total from ratings. In the most recent
quarter, structured finance accounted for 22.7 percent of
Moody's, S&P and Fimalac's (LBCP.PA) Fitch made hundreds of
millions of dollars rating structured finance products such as
mortgage bonds during the financial crisis. Ratings agencies
were criticized for giving many of those securities higher
ratings than they deserved.
Moody's said first-quarter revenue rose to $577.1 million
from $476.6 million a year earlier.
(Reporting by Clare Baldwin and David Henry; editing by John
Wallace and Andre Grenon)