Credit Suisse Starts Moody's Corp (MCO) at Neutral

Credit Suisse initiates coverage on Moody's Corp (NYSE: MCO) with a Neutral rating and a price target of $99.00.

Analyst Ashley Serrao commented, "The Moody’s franchise today is heavily reliant on the ratings business (82% of EBITDA). While we are constructive on long-term debt issuance, given low global rates and growing GDPs, estimates already more than acknowledge the upside here in the near-term, and we believe the business is operating close to peak margins after a surge in debt issuance in recent years. This set-up amplifies the risk of a broader slowdown in debt issuance (beyond Brexit) driving meaningful negative estimate revisions but we acknowledge this is not a Lehman like moment and healthy refinancing pipelines should mitigate downside. Moreover, the pro-cyclical transaction-oriented ratings revenue model further exacerbates margin pressure in the event of a downturn. Specifically, relative to SPGI, the firm is more exposed to more cyclical and higher-margin structured products (19% of revs vs. 12% at SPGI), and derives a greater portion of revenues from transactions vs. recurring relationships (61% vs. 46% at SPGI)."

For an analyst ratings summary and ratings history on Moody's Corp click here. For more ratings news on Moody's Corp click here.

Shares of Moody's Corp closed at $97.85 yesterday.

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