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MCO – Market expectations are for Uniform ROA to expand, but management may be concerned about sales, credit ratings, and Moody’s Analytics

October 27, 2020

  • Moody’s Corporation (MCO:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 30.2x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about the impact of COVID-19 on their sales, credit ratings quality, and Moody’s Analytics

  • Specifically, management may be concerned about the impact of COVID-19 on their customer renewals and new sales activity. Furthermore, they may lack confidence in their ability to remain consistent in the quality of credit ratings, integrate Vigeo Eiris and Four Twenty Seven, and provide different services on the cross-border market and through Moody’s Analytics. In addition, they may be exaggerating the benefits they received from excess issuance in the insurance and banking sector. Finally, they may lack confidence in their ability to fully transition in working virtually, get BvD to use Moody’s beneficial ownership data, and provide second-party opinion on the use of proceeds