Financial rating agency Moody's (MCO) is usually in the news for the ratings it gives other companies. You may not realize Moody's is a publicly traded company and makes good money providing those ratings on corporate and government bonds. In spite of taking some blame for the financial crisis of 2007 through 2009, Moody's is currently producing steady financial results.
Moody's generate revenues from two business segments. Moody's Investors Service provides the credit ratings for companies and government entities around the globe. Moody's Analytical Service provides custom risk analysis and related data. Investors Service generates about 70 percent of company revenues and Analytical Service the balance. Moody's generates just under half of revenues from contracts outside of the United States.
For the second quarter of 2011, Moody's posted nice increases in revenues and net income. Reported revenues were $605 million, up 26 percent from the $478 million in sales for the same period in 2010. Net income per share of 82 cents was 60 percent higher than the 51 cents from a year earlier. The quarterly dividend was increased by 2 cents to 14 cents per share starting with the first quarter 2011 earnings report.
Moody's management has stated long term goals of 10 percent or better annual revenue growth and an operating margin greater than 40 percent. Results so far in 2011 are well above the desired revenue growth rate. The company reported an operating margin of 44.6 percent in the second quarter, up from 39.9 percent one year earlier. Management's full year earnings guidance is between $2.38 and $2.48 per share. The current Wall Street consensus for 2011 is $2.46 and the analysts are expecting $2.65 in 2012.
The most recent analyst communication on MCO comes from Piper Jaffray, with a reiteration of an overweight rating on the stock. However, the target price was reduced by $1. Analyst Edward Atorino of The Benchmark Company recently expressed an opinion that the rating agencies like Moody's will avoid legal repercussions from their part in the financial crisis.
The company reports next on Oct. 26.
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