RBC maintains Moody’s stock Outperform rating, $550 target

On Tuesday, RBC Capital Markets sustained their optimistic stance on Moody’s Corporation (NYSE:MCO) shares, maintaining both an Outperform rating and a $550.00 price target. The stock, currently trading at $448.09 with a market capitalization of $80.71 billion, has received positive attention from analysts, with InvestingPro data showing eight analysts revising their earnings estimates upward for the upcoming period. The firm’s analyst, Ashish Sabadra, addressed concerns regarding the current challenges faced by the company, particularly in the area of Market Intelligence Services (MIS) revenues. Despite these concerns, InvestingPro data reveals impressive revenue growth of 19.81% over the last twelve months, with the company maintaining a robust financial health score rated as "GOOD". Sabadra noted a downward revision in MIS transaction revenue estimates to $647 million, which aligns with projections from RBC Elements™, the firm’s proprietary data science team.

Sabadra cited the weaker than expected issuance year-to-date and the anticipation of continued subdued issuance activity in March due to market and rate volatility as reasons for the conservative adjustment. Furthermore, the analyst revised the Fiscal Year 2025 MIS revenue growth forecast to approximately 5%, which is at the lower end of the company’s guidance range of mid-single digits to high-single digits.

Despite these immediate challenges, RBC’s outlook for Moody’s remains positive. The analyst expressed confidence in the long-term secular trends and the potential for Moody’s to benefit from a recovery in the capital markets over the medium term. Supporting this optimistic outlook, InvestingPro highlights the company’s impressive 15-year streak of dividend increases and consistent dividend payments for 28 consecutive years. The firm’s position indicates a belief in the underlying strength and future prospects of Moody’s, despite the current headwinds in transaction revenues. For deeper insights into Moody’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Moody’s Corporation, known for its credit ratings, research, and risk analysis, is navigating a complex financial landscape. RBC’s maintained rating and price target reflect an expectation that the company will overcome short-term obstacles and capitalize on growth opportunities ahead. The analyst’s comments underscore the balance between near-term caution and medium-term optimism for Moody’s financial performance.

In other recent news, Moody’s Corporation reported robust financial results for the fourth quarter of 2024, significantly surpassing analysts’ expectations. The company achieved an earnings per share (EPS) of $2.62, exceeding the forecast of $2.30, and reported revenue of $1.67 billion, which also surpassed the anticipated $1.59 billion. This strong performance was driven by a 13% year-over-year increase in quarterly revenue, supported by high demand for Moody’s services and products. In response to these positive developments, several analyst firms have adjusted their outlooks for Moody’s. BMO Capital Markets increased its price target for Moody’s from $481 to $531, citing strong quarterly performance and favorable guidance. Similarly, Stifel raised its price target to $533 from $459, while Oppenheimer set a new target of $573, up from $545, maintaining an Outperform rating. These revisions reflect confidence in Moody’s strategic initiatives and its restructuring program aimed at enhancing efficiency. Additionally, Moody’s has projected high single-digit revenue growth for 2025, with an expected adjusted operating margin expansion of about 200 basis points.

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