Moody's Q2 Highlights: Earnings Beat, Generative AI Opportunity, Solid Investor Demand & More

Moody's Corp MCO reported second-quarter FY23 sales growth of 8% year-on-year to $1.49 billion, beating the analyst consensus of $1.45 billion.

Moody's Analytics revenue climbed 11% Y/Y to $747 million, and Moody's Investor Service grew 6% to $747 million.

Increased investor demand for high-quality credits, combined with issuers seeking to refinance in advance of the U.S. debt ceiling deadline, led to higher-than-expected investment grade activity in the quarter.

Operating expenses grew 8% versus the prior-year period. The operating margin for the quarter remained flat at 36.8%.

Adjusted EPS of $2.30 beat the consensus of $2.24.

Cash flow from operations for 1H FY23 totaled $1.21 billion, with a free cash flow of $1.08 billion.

The company held $2.3 billion in cash and equivalents as of June 30, 2023.

On July 24, 2023, the Board of Directors declared a regular quarterly dividend of $0.77 per share of MCO, payable on September 8, 2023, to stockholders of record at the close of business on August 18, 2023.

As of June 30, 2023, Moody's had $7.2 billion of outstanding debt and an undrawn $1.25 billion revolving credit facility.

"Moody's is poised to capitalize on the momentous opportunity of generative AI to activate the power of our unique and verified data sets," said President and CEO Rob Fauber.

Outlook: Moody's raised FY23 adjusted EPS outlook from $9.50-$10.00 to $9.75-$10.25 versus an estimate of $9.94.

It also raised FY23 revenue guidance from mid-to-high-single-digit percentage growth to high-single-digit growth.

Price Action: MCO shares are trading higher by 0.33% at $358.05 on the last check Tuesday.