Moody's Tops Q1 Earnings Forecast

Credit ratings, research, and risk analysis provider Moody's Corp. (NYSE:MCO) reported first-quarter 2025 earnings on Tuesday, April 22, that topped analysts' consensus expectations. Adjusted earnings per share (EPS) of $3.83 came in ahead of the expected $3.52. Revenue of $1.924 billion was slightly over the anticipated $1.875 billion.

Overall, Moody's achieved robust growth in Q1 2025, marking a successful quarter despite some regulatory and economic challenges.

Source: Moody's Corp. Note: Analysts' consensus estimates for the quarter provided by FactSet. YOY = Year over year. Pps = Percentage points.

Business Overview

Moody's operates primarily through two segments: Moody's Investors Service (MIS) and Moody’s Analytics (MA). MIS is integral to the credit rating process, providing an evaluation of the creditworthiness of various securities and bond issuers. Meanwhile, MA is focused on risk management solutions, offering products that cater to financial research and analytics needs.

Moody’s continually focuses on expanding its integrated risk solutions, aligning its offerings to market demands, and adopting cutting-edge technology such as artificial intelligence (AI) and cloud-based models. These strategies aim to solidify its market stance and enhance customer value through superior analytics capabilities.

Quarterly Performance

Moody's revenue grew 8% year over year in the first quarter, supported by impressive gains in both its key segments. Moody's Analytics reported Q1 revenue of $859 million, an 8% year-over-year rise, primarily driven by 11% growth in the Decision Solutions area. Moody's Investors Service noted record-high quarterly revenue of $1.1 billion in Q1 2025, an 8% lift, aided by robust performances in the corporate finance and structured finance sectors. However, revenues from financial institutions declined in Q1 2025 due to reduced insurance issuance. This was partially mitigated by strong banking sector activity.

Operating expenses grew 9% year over year, including 3% from investments and operational costs, 3% from restructuring charges, and 2% related to mergers and acquisitions. Operating expenses include $33 million in charges related to the Strategic and Operational Efficiency Restructuring program that the company announced in Q4 2024. Foreign currency favorably impacted operating expenses by 1%.

The company highlighted key strategic initiatives focused on innovative integrated risk solutions and the adoption of advanced technology, reflecting management's commitment to meeting complex market needs. Efforts on sustainability and geographic expansion, particularly in emerging markets like Africa and Latin America, also demonstrate proactive growth strategies. Meanwhile, regulatory compliance remains a focal point, emphasized by the evolving requirements such as the EU AI Act and ESG frameworks that Moody's navigates to maintain operational stability.

Moody's announced an increased quarterly dividend of $0.94 per share, an 11% uplift from the prior year, reflecting a strong commitment to shareholder returns. The company also had approximately $1.2 billion in share repurchase authority remaining as of March 31, 2025, strengthening its capital management strategy.

Looking Ahead

Moody's management provided optimistic guidance, forecasting full-year adjusted EPS to range from $13.25 to $14 for fiscal 2025. The company anticipates ongoing growth in both segments, driven by high-single-digit percentage increases in revenue across Moody’s Analytics and mid-to-high-single-digit rises in MIS revenue for 2025. Operating expenses are projected to increase in the low-to-mid-single-digit percent range in 2025.

Investors should watch for continued technological innovations and strategic market expansions, which are expected to fuel future gains. Moody's extensive focus on integrated risk solutions aims to bolster its competitive edge in the credit rating and financial analytics industry.

Revenue and net income are presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Moody's. The Motley Fool has a disclosure policy.