Benchmark Gives Update On Moody's After Reporting Strong Earnings

Moody's MCO reported strong 1Q11 results and raised 2011 guidance. 1Q11 total revenue of $577 million, up 21% y/y, beat consensus of $521 million and Benchmark's estimate of $531 million, as all revenue segments increased y/y. EPS of $0.67 beat consensus of $0.54 and Benchmark's estimate of $0.56. Guidance for 2011 increased, projecting 2011 revenue growth up high-single digits y/y with EPS between $2.22- $2.32. Strength was driven by a $55 million increase y/y in corporate revenue and an $18 million increase in structured revenue. Corporate issuance benefited from favorable market conditions which have caused a pull-forward in investment grade and high-yield bonds. Structured finance benefited from secondary ratings on securitized debt in Europe. Moody's increased its quarterly dividend by 22% to $0.14, which represents an annual yield of 1.5%. Moody's also repurchased 4.3 million shares for $128 million or an average share price of roughly $30 in 1Q11. Benchmark has a $43 PT and Buy rating on MCO MCO closed Wednesday at $38.33