Moody's

S&P Global Q3 2024 $SPGI (+0.71%)

Financial performance:

S&P Global delivered a robust financial performance in Q3 2024 with revenue up 16% to USD 3,575 million. This growth was mainly driven by strong performances in the Ratings and Indices segments. Adjusted operating profit increased by 20% to USD 1,744 million, indicating improved operational efficiency.

Balance sheet analysis:

The balance sheet shows a stable financial position, with total assets of USD 60,368 million as of September 30, 2024. The company recorded an increase in cash and cash equivalents to USD 1,697 million, compared to USD 1,291 million at the end of 2023, indicating improved liquidity. However, there was a slight increase in current liabilities, which could indicate rising financial obligations.

Income statement:

The income statement shows a significant increase in net income, resulting in a 33% increase in GAAP diluted EPS to $3.11. In addition, adjusted diluted EPS increased 21% to $3.89 due to higher adjusted net income.

Cash flow analysis:

S&P Global's cash flow from operating activities was strong, totaling $1,445 million in the third quarter. Free cash flow improved to USD 1,330 million, indicating efficient cash management. Nevertheless, spending on financing activities increased, indicating higher outflows related to financing.

Key figures and profitability:

The company's operating profit margin improved by 530 basis points to 40.1%, while the adjusted operating profit margin increased by 180 basis points to 48.8%. These improvements underline the increased profitability and operational efficiency.

Segment analysis:

• Ratings: Sales increased by 36%, driven by strong demand for credit ratings.
• Indices: Sales grew by 18%, supported by higher asset-linked fees and exchange-traded derivatives.
• Commodity Insights: Sales increased by 9%, supported by a strong performance in the energy sector.
• Market Intelligence: Sales increased by 6%, although the adjusted margin outlook was revised downwards.

Competitive Analysis:

S&P Global continues to leverage its strong market position in credit ratings and indices. The company's strategic focus on sustainability, energy transition and generative AI positions it favorably against competitors in the evolving market environment.

Forecasts and management commentary:

The company has updated its forecast for 2024 and expects sales growth of between 11.5% and 12.5%, which represents a significant increase on the previous range of 8.0% to 10.0%. In addition, the operating profit margin is expected to expand to between 600 and 650 basis points.

Risks and opportunities:

The main risks include the potential impact of rising short-term debt and falling unrealized income, which could affect future revenue recognition. On the other hand, strategic investments in sustainability and AI offer significant opportunities for growth.

Summary and strategic implications:

S&P Global's strong financial performance and strategic initiatives indicate a stable financial position and significant growth potential. The company's focus on sustainability and AI as well as its robust revenue growth position it favorably for sustained success. Nevertheless, careful management of financial commitments and revenue recognition will be critical to maintain this growth trajectory. If you get the price right, then definitely a buy candidate alongside $MCO (+0.54%) .

Positive statements:

• Revenue growth: S&P Global reported a 16% increase in revenue in the third quarter of 2024, reaching $3,575 million, indicating strong performance across all segments.
• Earnings per share: Adjusted diluted earnings per share increased 21% to $3.89, supported by an 18% increase in adjusted net income and a 2% reduction in diluted shares outstanding.
• Forecast adjustment: S&P Global updated its 2024 guidance to expect revenue growth between 11.5% and 12.5%, an increase from the previous range of 8.0% to 10.0%.
• Expected margin expansion: The company expects operating profit margin expansion of 600 to 650 basis points, indicating improved operating efficiency.
• Strategic focus: The strategic focus on the energy transition, sustainability and the use of generative AI is expected to expand S&P Global's data capabilities and position the company for future growth.

Negative statements:

• Revision of margin guidance: Despite the overall positive performance, the adjusted margin outlook for the Market Intelligence division has been revised downwards to 32.5% - 33.0% from 33.0% - 34.0% previously.
• Short-term debt: The company's short-term debt increased, with payments on short-term debt totaling $188 million, which could indicate increasing financial obligations.
• Financing expenses: Cash flows used in financing activities increased to $3,280 million from $2,602 million in the prior year, indicating higher outflows related to financing.
• Unearned Revenue: Unearned revenue decreased from $3,461 million at the end of 2023 to $3,288 million at September 30, 2024, potentially impacting future revenue recognition.
• Management change: The change in leadership, with Martina Cheung to be appointed as the new President and CEO, brings uncertainty as the company manages this change in top management.

Q3 2024 Moody's $MCO (+0.54%)

Financial performance:

Moody's Corporation reported a strong third quarter 2024, with revenue up 23% to $1.8 billion. Adjusted diluted EPS increased 32% to $3.21, while adjusted operating margin increased 320 basis points to 47.8%. This positive development was driven by significant growth in both segments - Moody's Investors Service (MIS) and Moody's Analytics (MA).

Balance sheet analysis:

As of September 30, 2024, Moody's reported total assets of $15.769 billion, including $2.642 billion in cash and cash equivalents. Shareholders' equity remained solid at USD 4.068 billion, underscoring the company's strong financial position.

Income statement:

The income statement shows robust growth in both sales and profitability. MIS sales increased 41%, while MA reported a 7% increase. Operating income for the quarter was $738 million, representing an operating margin of 40.7%.

Cash flow analysis:

Moody's generated operating cash flow of $2.164 billion in the first nine months of 2024, a significant year-over-year increase. Free cash flow amounted to USD 1.921 billion, supported by the strong growth in net income.

Key figures and profitability:

Adjusted operating margin for the quarter reached 47.8%, compared to 44.6% in the prior year. Full-year adjusted diluted EPS guidance was raised to a range of $11.90 to $12.10, representing year-over-year growth of approximately 21%.

Segment analysis:

• Moody's Investors Service (MIS): Posted impressive revenue growth of 41%, with transactional revenue up 70%. The adjusted operating margin of MIS was a strong 59.6%.
• Moody's Analytics (MA): Reported a 7% increase in revenue and growth in annual recurring revenue (ARR) and recurring revenue of 9% each. MA's adjusted operating margin was 30.3%.

Competitive analysis:

Moody's continues to strengthen its competitive position, particularly in the ratings business, which saw a 41% increase in revenue. The company is also expanding its capabilities in personal lending and sustainable finance, positioning itself for future growth in these areas.

Forecasts and management comments:

The company has raised its full-year MIS revenue growth guidance to the high 20% range, with adjusted operating margin of 59%-60%. For MA, guidance for ARR growth remains in the high single-digit to low double-digit range, with adjusted operating margin of 30%-31%. Management expressed optimism for future growth, supported by cyclical and structural tailwinds such as refinancing waves and increased M&A activity.

Risks and opportunities:

• Risks: Slower than expected adoption of GenAI technologies by large financial institutions and a potential decline in transactional revenue at Moody's Analytics represent risks.
• Opportunities: Expansion into the private credit and sustainable finance market offers significant potential, with assets under management in private credit potentially growing to as much as $3 trillion by 2028.

Summary and strategic implications:

Moody's delivered a record-breaking quarter with strong growth across all segments. The company's strategic focus, particularly in personal lending and sustainable finance, positions it well for future growth. Nevertheless, challenges such as the slower roll-out of GenAI and potential declines in transactional revenues need to be addressed. Overall, Moody's is well positioned to benefit from favorable market conditions and is optimistic about further growth.

I am at least trying to find a favorable entry point and hope it works out.

5 positives and 5 negatives

Positive statements:

• Moody's Corporation reported an impressive 23% increase in revenue to $1.8 billion, marking a record-breaking quarter.
• Adjusted diluted EPS rose 32% to $3.21, underscoring the company's strong profitability.
• The Moody's Investors Service (MIS) segment delivered outstanding revenue growth of 41%, with transactional revenue up 70%, significantly outpacing global issuance growth of 51%.
• Moody's Analytics (MA) reported solid growth of 9% in both ARR and recurring revenue, with the Decision Solutions line leading the way with a 12% increase in ARR.
• The company raised its full-year guidance for MIS revenue growth to the high 20% range and adjusted operating margin to 59%-60%, signaling confidence in continued strong performance.

Negative statements:

• KYC ARR growth slowed to 14% in the third quarter, down from 19% in the year-ago quarter, due to the renewal of large contracts with the government at lower rates.
• Slower growth was observed in Moody's Analytics, with some areas such as Data & Information and Research & Insights falling short of expectations.
• The forecast for adjusted diluted EPS in the fourth quarter indicates flat or slightly declining year-on-year growth, pointing to potential challenges in maintaining the pace of growth.
• Moody's Analytics reported a decline in transactional revenue driven by a double-digit decline in low-margin transactional revenue.
• The adoption of GenAI capabilities by large financial institutions has been slower than expected, impacting the growth outlook for Moody's Analytics.

Hellas Investment Community,

How do you deal with companies that convince you of their business model but run permanently?

Notable mentions:

$FICO (+0.87%)

$CTAS (+0.52%)

$MCO (+0.54%)

$SPGI (+0.71%)

$COST (+0.72%)

I've been watching all these companies for some time now and I'm seeing them run away from me.

Valuation-wise they are getting more and more expensive and were already extremely expensive at the time of first contact. Every time I analyze them, I decide not to buy them only to see them gain another 20% a few months later.

How do you approach such companies? How do you value them? How do you fight your FOMO here?

Good return and best regards from Vienna

Number crunchers of the financial world: Moody's vs. S&P in a data duel

Company presentation

$SPGI (+0.71%) and $MCO (+0.54%) are the two leading rating agencies worldwide. Both companies assess the creditworthiness of companies, countries and financial products and play a decisive role on the global financial markets. Their ratings and analyses have a significant influence on the investment decisions of investors and the financing conditions of issuers.

Historical development

S&P Global

- Founded in 1860 as Poor's Publishing

- 1941 Merged with Standard Statistics to form Standard & Poor's Corporation

- Acquired by McGraw-Hill in 1966

- Since 2016, the company has operated as S&P Global, offering an expanded range of financial market data, analytics and index solutions

Moody's

- Founded in 1909 by John Moody

- Acquired by Dun & Bradstreet in 1962

- In 2000, the spin-off from Dun & Bradstreet took place and Moody's became an independent, listed company.

Business model and core competencies

- Credit ratings for companies, governments and financial products, including bonds and structured financial products.

- The sale of financial market data and analyses that are of central importance to institutional investors, banks and regulatory authorities.

- Market indices (especially at S&P), such as the world-renowned S&P 500.

Its core competence lies in the assessment of credit risks. Decades of experience, extensive databases and highly qualified analysts make both companies indispensable players on the international financial markets.

Market position and competition

S&P Global and Moody's dominate the global market for credit ratings, together with the third major rating agency, Fitch. These three companies - often referred to as the "Big Three" - control over 90% of the market.

| Aspect | S&P Global | Moody's |

|----------------|-----------------|------------------|

| Market share | approx. 40 % | approx. 35 % |

| Strengths | Leader in market indices (e.g. S&P 500) | Stronger in corporate ratings and structured products |

S&P Global enjoys an advantage through its market indices, which serve as a benchmark for many investment funds and institutional investors.

Moody's, on the other hand, has an advantage in corporate ratings, especially for large, complex financial products.

Future prospects and strategic initiatives

- The expansion of business with financial market data and analyses in order to become less dependent on the pure rating business.

- The use of artificial intelligence (AI) and machine learning to assess credit risks more precisely and efficiently.

- Expansion into emerging markets in order to benefit from the growing financial markets in these regions.

- The development of ESG ratings (environmental, social, governance), as investors are increasingly incorporating sustainable and ethical aspects into their decisions.

Total Addressable Market (TAM)

The global market for credit ratings and financial market data is growing steadily. The increasing complexity of the financial markets and the rising demand for comprehensive credit and ESG ratings are driving this growth. In addition, stricter regulatory requirements mean that more companies and financial products have to be rated. Estimates for the overall market are in the double-digit billion range, which offers plenty of scope for further growth.

Share performance

The shares of S&P Global and Moody's have performed impressively in recent years. Both benefit from stable earnings, high margins and the growing importance of financial market data. Moody TR over 5 years 142% and S&P from 109%

For the development (company figures), a better view and more, check out the free blog:https://topicswithhead.beehiiv.com/p/zahlenjongleure-der-finanzwelt-moody-s-vs-s-p-im-daten-duell

Conclusion

In a highly regulated market with only three providers and a rising trend, there are basically only winners. Therefore, the long-term trend is less decisive as long as no major screw-ups occur. However, it must be noted that S&P's numbers do not look particularly bright at the moment, especially after a very good period. It remains to be seen, because if the situation continues like this for another two years, it would be anything but positive.

For me, Moody's is a preferred choice because Moody's specializes more in data analytics and other data-driven services. While Moody's returns on capital are not as high as S&P's, they are consistent and achieve high value over the long term. That's probably why Warren Buffett remains invested; after all, you outperform the market over the long term as long as you can crack the 10% mark in returns on capital. This does not mean that S&P is bad. If you can buy both cheaply, you should go for it because the business is highly regulated and extremely interesting.

Companies that I find interesting but do not yet have in my portfolio and that have a 10-year average ROIC of over 10% and a 5-year average ROCE and ROIC of over 10%, $ANET (+0.18%), $MA (+0.39%) , $VRTX (+0.51%) , $RMS (-0.16%) , $PGHN (+1.77%) , $COLO B (+1.22%) , $ACN (+0.63%) , $MNST (+1.16%)
$FICO (+0.87%) , $MCO (+0.54%) , $KNIN (+0.51%) , $S&P Global, $ISRG (+0.58%)
$III (+0.94%) , $BKNG (+0.48%)
$HLAG (+0.19%) , $QCOM (+0.86%) , $CFR (+0.51%) and $IFX (+0.08%) . Already blatant companies

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As far as the Ultimate Homer "ETF" is concerned, many new stocks were added in September 😁

In since September 2

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New long-term position

Hello, after a long period of consideration, I have decided to sell my shares in the Digital Security ETF and would like to replace this position with shares in a company in the financial sector.

My candidates:

Nu Holdings ( $NU (+2.15%) )

Moody's ( $MCO (+0.54%) )

Blackstone Group( $BX (+1.94%) )

• With $NU (+2.15%) I would be better diversified geographically and have a nice growth company with me
• Moody's is also a nice buy & hold company with a deep moat
• Blackstone would give me a little exposure to private equity. I'm already partly in that through Mutares ( $MUX (-1.11%) ), but Blackstone invests in larger companies/projects. So there wouldn't be too much overlap here

Which of the 3 companies do you think you would choose and why? Or would you choose a completely different one?

I already have some financials in my portfolio:

S&P Global ( $SPGI (+0.71%) )

Visa ( $V (+0.68%) )

Mastercard ( $MA (+0.39%) )

Blackrock ( $BLK )

Mutares ( $MUX (-1.11%) )

Hey, I noticed that the shares of $SPGI (+0.71%) and $MCO (+0.54%) hardly get any attention here, why is that?

Is anyone invested or planning to be? Both have recently landed on my watchlist.

Upcoming events for next week:

Monday:

• Arista Networks Inc. ($ANET (+0.18%) ) and Cadence Design Systems Inc. ($CDNS (-0.03%) ) report quarterly figures before.
• Monthly US federal budget statement (January).

Tuesday:

• Quarterly figures from Coca-Cola ($KO (+0.9%) ), Moody's Corp. ($MCO (+0.54%) ), Shopify Inc. ($SHOP (+1.01%) ), Airbnb Inc. ($ABNB (+0.6%) ) and Marriott International Inc. ($MAR (+0.57%) ).
• Consumer Price Index (CPI) (January).

Wednesday:

• Quarterly figures from Cisco ($CSCO (+0.71%) ), Sony Group Corp. ($6758 (+0.57%) ) and Kraft Heinz Co. ($KHC (+0.9%) ).

Thursday:

• Quarterly figures of Applied Materials Inc. ($AMAT (+0.29%) ), Stellantis ($STLAM (-1.79%) ), Occidental Petroleum Corp. ($OXY (+0.71%) ), John Deere & Co. ($DE (+0.35%) ), DoorDash Inc. ($DASH (+0.28%) ), CBRE Group Inc. ($CBRE (+0.4%) ), Coinbase Global Inc. ($COIN (+0%) ) and DraftKings Inc. ($DKNG (+0.44%) ).
• Initial claims for unemployment benefits (week ending February 10)
• US Retail Sales (January)
• Import Price Index (January)
• Industrial Production (January)
• Capacity utilization (January)
• Homebuilder confidence index (February)

Friday:

• Producer Price Index
  (PPI) (January)
• Building permits (January)
• Michigan Consumer Sentiment Index (Preliminary February)

Stock analysis/share presentation ⬇️

Today we are talking about Moody's Corporation: $MCO (+0.54%)

What is and does Moody's do anyway 🤔.

Moody's is a U.S. company in the financial sector. The company analyzes and evaluates various states, companies, institutions as well as a wide variety of financial products and then issues ratings for them. Moody's thus creates trust and reliability on the financial market. In addition, the rating agency also offers its customers products and services in the field of financial analysis and risk management.

What is the breakdown of net revenue at Moody's:

Net revenue is distributed among the various activities as follows:

• Analytical and risk management services (50.6%): mainly credit advisory, research and analytical services, sales of risk management software, etc.
• Financial notation services (49.4%): for estimating companies' solvency risks.

Net sales are distributed geographically as follows: United States (52.5%), Americas (6.5%), Europe/Middle East/Africa (30.8%) and Asia/Pacific (10.2%).

When was Moody's founded?

The company was founded in 1900 by John Moody and is headquartered in New York City, New York.

How many employees does the company have: 🙋🏽‍♂️🙋🏻‍♀️

Currently, Moody's has a total of over 14,400 employees.

P/E RATIO:

Moody's has a current P/E ratio of just under 39.50 , which in my opinion is currently quite highly valued.

Market capitalization: 🏦

Currently, Moody's has a market capitalization of around 50.5 billion euros.

Dividend yield: 💰

The company pays its shareholders a nice dividend of currently over 1.0%. This payout is made on a quarterly basis. Moody's shareholders receive their dividends in March, June, September and December.

Strengths of the share: 📈

• The company pays its shareholders a 1% dividend.
• The average price target of analysts following the share has been revised upwards significantly in the last four months.
• Predictability on the company's business activity appears relatively good against the backdrop of closely matched analyst estimates.

Weaknesses of the share: 📉

• The company is currently very highly valued with a P/E ratio of almost 40 in my opinion atkuell.
• Expectations regarding sales figures for the past 12 months have largely been revised downwards. Analysts are now forecasting lower sales figures.
• Over the past 12 months, analysts have regularly revised their earnings estimates downward.
• The company's valuation level is particularly high given the cash flow generated.

Moody's business model:

Moody's is one of the world's leading providers of ratings and financial data. Moody's business model can be divided into two areas.

Moody's Investors Service: This area includes all activities that deal with assessments and ratings. In other words, it involves the preparation of ratings. The company evaluates various countries, companies, institutions and a wide range of financial products.

In the case of companies, the main focus is on evaluating creditworthiness. Based on this, Moody's can make decisions regarding the lending rate. With a good rating from Moody's, the bank will offer better interest rates. Thus, companies rely on Moody's credit rating. Moody's collects fees for issuing the ratings. Because of its excellent market position, the company has strong pricing power.

Moody's Analytics: This segment is mainly about providing financial data, analytics and credit risk management tools in the form of software. 70% of Fortune 100 companies rely on Moody's data. In total, the company has over 15,000 clients in 155 countries. Its clients include sovereigns, banks, insurance companies, real estate firms, asset managers, and more.

As one of the largest rating agencies in the world, Moody's benefits from the excellent reputation it has built up over more than 100 years. In an increasingly fast-paced and complex world, trusted credit ratings and reliable financial data are more relevant than ever. This is a service Moody's can pay well for.

A little more about the industry:

Moody's operates in the ratings market. This has existed for over 100 years. This industry is about selling trust. Money and finance are a sensitive subject. Before I invest my money, I want to know what I will get in return. Especially in the financial markets, every rational investor wants to have all the necessary information about his investment. This helps him to assess whether the investment will deliver added value in the future.

This is where the rating agencies come into play, among other things. The rating agency examines the balance sheets, the security and level of cash flows, and much more information, some of which is not public, such as customer relationships and suppliers. Then, using a formula and also individual assessment, a grade is calculated for the creditworthiness.

The better the grade, the more creditworthy the company or even a state, and the more favorable the interest rates for a bond. The best rating is AAA (for S&P and Fitch) or Aaa (for Moody's). With such ratings for a company, the probability that the company will become insolvent within a year approaches 0. With a rating of BB, the risk is already significantly higher and the investment more speculative.

The largest companies in the market are S&P Global with 43% market share and Moody's with 33% market share. They are followed by the rating agency Fitch with 17% market share. These three companies therefore account for over 90% of the total market. In recent years, the market has grown at a rate of 5.8% per year. This was mainly due to low interest rates. Interest rate hikes are expected to reduce the demand for loans. But that can make it all the more important to have a good credit rating to get the best loan terms.

In addition to the ratings business, Moody's is also active in the financial data market. This market is also about 100% trust and reliability. However, the industry is highly concentrated, with Bloomberg and Refinitiv controlling 53% of the industry and Moody's coming in at just around 6% market share.

Corporate Objective:

Moody's mission can be quickly identified on its own website. There it says "Moody's - better decisions". That's what it's all about for the company. No investor makes random decisions; everything must be properly considered and analyzed. However, this is not always easy in the financial world. For a long time, the financial market was very intransparent. The fact that this has improved over the past few years is also thanks to Moody's. Its mission is to provide trustworthy information and data that help decision-makers act with confidence.

Your opinion:🧐🤔

Now I'd love to hear your thoughts on this stock in the comments.

What do you think of Moody's and did you already know this company?

Do you guys maybe already have this stock in your portfolio?

Feel free to let me know in the comments.

Of course, this is not investment advice but just my own opinion that I would like to share with you.