Moody's Poised For Revenue Growth, Litigation Issues Remain

On Jun 19, we issued an updated research report on Moody's Corporation (NYSE:MCO) . The company remains poised for growth, given the diverse revenue base and synergies from acquisitions. However, stricter regulatory landscape, litigations issues and stiff competition across the credit rating industry remain key headwinds.

Increase in bond and bank loan issuance along with higher monitoring revenues related to new ratings customers should remain key drivers in the corporate finance line. This is one of the largest revenue contributors at Moody’s.

Also, the company is pursuing growth opportunities outside its core services. Moody’s has been expanding into professional services, enterprise risk solutions and analytics sectors. All these should support its top-line growth.

This New York-based company remains focused on pursuing growth opportunities through strategic acquisitions. This is providing the company with increased scale and cross-selling opportunities across products and vertical markets. Moody’s plans to continue pursuing acquisitions that are strategic fits and also diversify its revenue base over the long term.

Driven by such initiatives, analysts are optimistic about the prospects of the company. The Zacks Consensus Estimate for 2017 increased 1.3% over the last 60 days. Also, this Zacks Rank #3 (Hold) stock has gained 29.6% so far this year compared with 4.8% rise for the Zacks categorized Miscellaneous Financial Services industry.



On the flip side, Moody’s along with other credit ratings agencies was accused of issuing inflated ratings on mortgage-backed securities that later resulted in the 2008–2009 credit crises. This led to heightened scrutiny from regulators and a rise in expenses related to compliance and governance, marginally hurting its bottom line.

Further, Moody’s faces stiff competition in most of the markets in which it operates. This will likely continue putting pressure on pricing that may hurt profitability in the long run.

Stocks to Consider

Stocks in the finance industry worth considering include PJT Partners Inc. (NYSE:PJT) , Comerica Incorporated (NYSE:CMA) and BlackRock, Inc. (NYSE:BLK) .

PJT Partners witnessed an upward earnings estimate revision of 8.5% for the current year, in the last 60 days. So far this year, its share price has increased 27.4%. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Comerica, with a Zacks Rank #2 (Buy), witnessed an 8.8% upward earnings estimate for the current year, in the last 60 days. Its share price has increased 10.3%, year to date.

For the current year, BlackRock’s Zacks Consensus Estimate has been revised marginally upward, in the last 60 days. Its share price has increased 14% so far this year.

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