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Moody’s MCO shares touched an all-time high of $531.93 on Friday, the day after announcing solid fourth-quarter 2024 results and an impressive 2025 outlook.
Its fourth-quarter adjusted earnings of $2.62 per share surpassed the Zacks Consensus Estimate of $2.60 and jumped 20% from the year-ago quarter figure. Robust global bond issuances and steady demand for analytics supported the results.
Additionally, Moody’s came out with a strong 2025 outlook. The company projects adjusted earnings to be in the range of $14.00-$14.50 per share. In 2024, the metric was $12.47.
Moody’s shares have gained 10.5% this year, outperforming the industry’s rally of 5.2%. The stock has fared better than its close peers – S&P Global Inc. SPGI, MSCI Inc. MSCI and Dun & Bradstreet Holdings, Inc. DNB.
Year-to-Date MCO Stock Price Performance
Image Source: Zacks Investment Research
Let’s first discuss the company’s 2025 outlook in detail and then check out other factors at play.
Revenues are anticipated to increase in the high-single-digit percent range.
Further, operating expenses are expected to rise in the low-to-mid-single-digit percent range. The company projects $80 million to $100 million in restructuring charges related to the Strategic and Operational Efficiency Restructuring Program.
Adjusted operating margin is expected to be approximately 50%. Last year, it was 43.8%.
On a GAAP basis, earnings are projected to be within $12.75-$13.25 per share. In 2024, GAAP earnings were $11.26 per share.
Other Major Factors at Play for Moody’s
Inorganic Expansion Initiatives: In January, Moody’s announced a deal to acquire CAPE Analytics, a leader in geospatial artificial intelligence (AI) for residential and commercial properties. Further, in 2024, the company acquired Numerated Growth Technologies and Praedicat. Through these buyouts, the company intends to pursue growth in areas outside the core credit ratings service.
Moreover, in July 2024, MCO established a strategic alliance with MSCI to enhance its environmental, social and governance (ESG) solutions and acquired a 100% stake in GCR to deepen its presence in Africa’s domestic credit market.
Over the years, Moody’s has been strengthening its footprint and credit rating solutions through strategic acquisitions/partnerships. In 2023, it acquired SCRiesgo to boost its presence in Central America and the Dominican Republic. It announced a partnership in Vietnam, VIS Rating, to bolster its presence in the country’s financial sector. Its inorganic growth efforts are expected to help diversify revenues and provide it with increased scale and cross-selling opportunities across products and vertical markets.
Strong Balance Sheet & Liquidity: Moody’s diversifying efforts are well supported by a strong balance sheet position. As of Dec. 31, 2024, it had total debt worth $6.73 billion, an undrawn revolving credit facility of $1.25 billion, and cash and cash equivalents and short-term investments of $2.97 billion. These will enable it to continue pursuing growth opportunities.
For 2025, Moody’s expects cash flow from operations of $2.75-$2.95 billion and free cash flow in the range of $2.40-$2.60 billion.
Driven by a solid liquidity position, MCO has an impressive capital distribution activity. In February, Moody’s announced an 11% hike in quarterly dividend to 94 cents per share. The company increased its dividend six times in the past five years, and its payout has grown 10.65% over the same period. MCO's payout ratio currently sits at 27% of earnings.
Further, in October 2024, the company announced an additional $1.5 billion in share repurchase authority. As of Dec. 31, 2024, it had nearly $1.6 billion worth of shares available. Driven by its earnings strength and a strong balance sheet position, Moody's is expected to continue efficient capital distributions.