4 Reasons Why Moody's (MCO) Is An Attractive Pick Right Now

Moody's Corporation (NYSE:MCO) has been growing organically as well as inorganically backed by its strong capital position. The company is pursuing growth in areas outside the core credit ratings service for public fixed-income securities. It has increased its exposure to the banking and insurance industry, branching into the emerging and fast-growing professional services and enterprise risk-solutions’ sectors.

Further, a positive trend in estimate revisions reflect optimism over the company’s earnings growth prospects. The Zacks Consensus Estimate for Moody’s current-quarter earnings has moved up one cent per share over the last 60 days. Also, the current year’s earnings estimates have climbed 3.2%. As a result, the stock currently carries a Zacks Rank #2 (Buy).

Shares of Moody’s have rallied 45.1% year to date, substantially outperforming the industry’s growth of 7%.

What Makes Moody’s a Solid Pick?

Earnings Strength: Moody’s recorded an earnings growth rate of 12.9% over the last three to five years compared with 7.4% for the industry it belongs to. The earnings growth rate for the current and the next year is anticipated to be 14.4% and 11.9%, respectively.

Further, the company has an impressive earnings surprise history, outpacing the Zacks Consensus Estimate in each of the trailing four quarters. It delivered an average surprise of 14.1% for this period.

Revenue Growth: Organic growth remains strong at Moody’s. Revenues witnessed a compound annual growth rate of 7.2% over the last five years (2012-2016). Further, the top line is expected to increase 10.3% in 2017 compared with no growth for the industry.

Impressive Capital Deployment: Moody’s capital deployment plan is commendable. In December 2016, the company announced a 3% dividend hike. Further, Moody’s had remaining repurchase authorization worth nearly $600 million, as of Jun 30, 2017. Given its solid liquidity position and earnings strength, the company should be able to sustain this level of capital deployment.

Strong Inorganic Growth: Moody’s has grown significantly over the years through several strategic acquisitions that provided it with increased scale and cross-selling opportunities across products and vertical markets. Recently, the company acquired Amsterdam, Netherlands-based Bureau van Dijk. In February 2017, it acquired the structured finance data and analytics business of Frankfurt-based SCDM. The company will continue to pursue acquisitions (especially in Asia and Latin America) that are strategic fits and suitable for diversifying revenue base.

Some better-ranked stocks from the finance space are The Bank of Nova Scotia (TO:BNS) , AeroCentury Corp. (NYSE:ACY) and ING Group, N.V. (NYSE:ING) , each sporting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bank of Nova Scotia witnessed an upward earnings estimate revision of 8.3% for the current year, in the last 60 days. Its share price increased 17.7% in the past 12 months.

Shares of AeroCentury have gained 45.5% in a year. The Zacks Consensus Estimate for current-year earnings has been revised 9.9% upward over the last 60 days for this leasing company.

ING Group has witnessed 5.4% upward earnings estimate revision for the current year, in the past 60 days. Moreover, its shares have gained 52.1% over the past 12 months.

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