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Investing.com -- Fitch Ratings has affirmed Moody’s Corporation (NYSE:MCO)’s Long-Term Issuer Default Rating (IDR) at ’BBB+’ with a Stable Outlook, the rating agency announced Monday.
The rating affirmation reflects Moody’s strong market position, long-term free cash flow potential, and conservative financial policies. Fitch also maintained the company’s Short-Term IDR and commercial paper ratings at ’F1’.
Moody’s financial flexibility remains robust, supported by over $2 billion in cash, an undrawn revolver, and a $1 billion commercial paper program. The company has consistently maintained conservative leverage, finishing 2024 with a leverage ratio of 2.1x and further reducing debt by repaying maturing bonds in the first quarter of 2025 with cash from its balance sheet.
Fitch expects Moody’s to end 2025 with leverage below 2.0x, absent any new debt issuance. The rating agency also projects that Moody’s will return approximately $2 billion to shareholders through dividends and share repurchases in 2025, continuing its practice of returning significant portions of free cash flow to shareholders.
The ratings reflect Moody’s Investors Service’s (MIS) strong position as a leading credit rating agency with high barriers to entry. The global scale, regulatory compliance infrastructure, and long history of investor acceptance protect the company from new competitors.
Moody’s has successfully diversified beyond its ratings business through Moody’s Analytics (MA), which generated $3.3 billion in revenue in 2024. This segment provides more stability as 95% of its revenue is recurring, helping to offset volatility in the ratings business.
Fitch noted that Moody’s paid $620 million in dividends in 2024 and expects this amount to grow with revenue in coming years. The company is projected to use its free cash flow for share buybacks and smaller acquisitions while maintaining total leverage below 2.5x.
For a rating upgrade, Fitch would look for growth in subscription-based revenue and a commitment to maintaining EBITDA leverage below 1.5x. Conversely, a downgrade could occur if debt-funded transactions push leverage above 2.5x without a plan to reduce it within 18-24 months, or if regulatory and litigation risks materialize alongside deteriorating operating metrics.
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