Moody’s (MCO) Q3 2021 earnings summary

Executive summary

• Q3 revenue rose 13% to $1.526B, with 13% growth in MA and 12% in MIS; adjusted diluted EPS was $2.69.

• Double-digit growth in both segments reflected favorable issuance conditions, refinancing and M&A activity, alongside recurring MA revenue growth and stable retention.

• FY21 revenue and adjusted diluted EPS outlook was raised; continued investment focused on high-growth markets and integrated risk assessment.

Financial highlights

• Revenue was $1.526B versus $1.356B in Q3 2020; adjusted operating income increased 2% to $737M, while adjusted diluted EPS was flat at $2.69.

• GAAP operating income was $676M versus $642M; net income attributable to common shareholders was $474M versus $467M, and diluted EPS was $2.53 versus $2.47.

• 9M revenue was $4.679B versus $4.081B; operating income was $2.330B versus $1.944B.

Outlook and guidance

• FY21 revenue growth guidance increased to the low-teens range; adjusted diluted EPS guidance was $12.15-$12.35 and GAAP diluted EPS $11.65-$11.85.

• FY21 adjusted operating margin guidance was ~51%; expenses were expected to rise ~10%, net interest expense was guided to $160-$180M and the effective tax rate to 19.5%-20.5%.

• FY21 free cash flow guidance was $2.2-$2.3B, with planned share repurchases of ~$750M subject to cash availability, market conditions, M&A and other capital allocation decisions.

• MIS revenue guidance was low-teens growth with adjusted margin ~62%; MA revenue guidance was mid-teens growth with adjusted margin ~29%.

• Macro assumptions included U.S. GDP growth of 5.5%-6.5%, global GDP growth of 5.5%-6.5%, U.S. unemployment below 5% and global high-yield defaults below 2% by year-end.