Moody's upgraded ahead of Q3 on strong issuance boost

Investing.com -- Raymond James upgraded Moody’s to Market Perform from Underperform ahead of the company’s third-quarter results on stronger issuance activity and reduced downside risk to its valuation multiple.

The bank said tight credit spreads helped drive healthy issuance in the quarter, supporting ratings revenue and likely positioning Moody’s to hit the upper end of its full-year revenue and earnings guidance.

Raymond James raised its Q3 revenue estimate for the company’s ratings unit to $1.07 billion, above the $1.02 billion consensus, and lifted its EPS forecast to $3.75.

Moody’s stock trades at about 31 times forward earnings, roughly in line with its five-year average, after a recent de-rating on concerns about artificial intelligence disrupting software and data providers.

Raymond James said such fears were overstated in Moody’s case, pointing to its ratings franchise’s proprietary nature and high barriers to entry, as well as Moody’s Analytics’ role in regulated markets.

Still, the broker flagged risks further out, warning that today’s tight spreads may not last and that private credit could weigh on the ratings business over the longer term.

It now expects 2025 ratings revenue of $4.0 billion, a 5.6% increase, compared with the 6% drop it previously forecast, but remains below consensus for 2026.

You May Also Be Interested In

• Barrick Mining said to delay IPO of American gold business to 2027
• TSX miners rally as precious metals stocks dominate top gainers
• NYSE uses Anthropic’s Mythos to find cyber security flaws