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Moody's reiterates Outperform stock rating amid strong issuance growth

EditorNatashya Angelica
Published 2024-05-16, 02:14 p/m

On Thursday, RBC (TSX:RY) Capital maintained its positive outlook on Moody's Corporation (NYSE:MCO), reiterating an Outperform rating with a $450.00 stock price target. The firm's update highlighted a significant increase in Corporate Finance issuance during the first quarter of 2024.

According to the latest data, there was approximately a 38.5% year-over-year rise in this sector, fueled by robust growth across various bond types. Notably, Global Non-Financial Speculative-Grade Bonds saw about a 31% increase, while Global Non-Financial Investment Grade (IG) Bonds surged by approximately 77%.

The revenue composition for Moody's Corporate Finance was reported to be split into 25% recurring and 75% transactional. Moreover, revenue distribution by product type was relatively even, with bank loans constituting 29%, high-yield (HY) bonds 13%, investment grade (IG) bonds 28%, and other financial products making up 30%.

The first quarter also witnessed a substantial 32% growth in issuances within Financial Institutions, contributing to strong revenue gains in Banking (around 21%), Insurance (close to 79%), and Managed Investments (approximately 100%).

Infrastructure-related issuances also experienced growth, with a 4.4% year-over-year increase. This was attributed to gains in both investment grade and high-yield segments. Lastly, Structured Finance revenues saw an approximate 15% year-over-year growth, primarily driven by activities in Asset-Backed Securities (ABS), Commercial Mortgage-Backed Securities (CMBS), and structured credit markets.

These figures underscore the financial services company's robust performance in the first quarter of 2024, supporting RBC Capital's continued confidence in Moody's stock.

InvestingPro Insights

Reflecting on RBC Capital's upbeat stance on Moody's Corporation, the latest data from InvestingPro provides a comprehensive financial perspective on the company. Moody's has demonstrated a consistent commitment to shareholder returns, having raised its dividend for 14 consecutive years, a testament to its financial stability and investor-friendly approach.

This aligns with the firm's solid financial performance, as evidenced by a revenue growth of 15.07% over the last twelve months as of Q1 2024, further substantiating RBC Capital's positive outlook.

Investors should note that Moody's is currently trading at a high Price/Earnings (P/E) ratio of 44.89, which may suggest a premium valuation compared to its earnings. Still, the company's dedication to maintaining dividend payments for 27 consecutive years, coupled with a dividend yield of 0.83%, continues to attract those seeking reliable income streams. With 11 analysts having revised their earnings upwards for the upcoming period, there is a sense of optimism surrounding the company's future profitability.

For those looking to delve deeper into Moody's financial health, InvestingPro offers additional insights and metrics. Subscribers can access a plethora of InvestingPro Tips, including analysis on the company's long-term profitability and performance trends. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the full range of expert tips, which currently number over 10 for Moody's Corporation, to inform your investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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