Moody’s Corp. (MCO), whose stock is near an all-time high, forecasts that revenue this year will increase by “high-single digits” from $2.7 billion in 2012, surpassing last year’s record sales on higher demand for ratings and boosting earnings.
The owner of the second-largest ratings company, reiterating its guidance, expects firms to take further advantage of borrowing costs that are near historic lows, according to an investor presentation today. Demand for the grades has been boosted by lower levels of funding from European banks, and higher growth in Asia that exceeds the capacity of its lenders, both leading to increased financing through bond markets, the company said.
Hopefully, the high single-digit growth forecast “will prove to be conservative,” Ray McDaniel, the company’s chief executive officer, said at the conference in New York. “The rate of growth that we have seen in recent years has in fact been better than low-double digit,” he said.
Earnings per share are growing at 13 percent, a trend that’s expected to continue, Linda Huber, chief financial officer at Moody’s, said at the conference.
Companies sold a record $4 trillion of bonds worldwide last year, according to data compiled by Bloomberg. The debt, which makes up most of Moody’s ratings revenue, is close to matching last year’s pace of offerings with $2.8 trillion of sales so far this year.
Unprecedented bond issuance has sent Moody’s shares soaring, climbing 57 percent in the last year including reinvested dividends, to $70.51 as of 4:15 p.m. in New York, near its record of $74.84 reached on Feb. 8, 2007, according to data compiled by Bloomberg.
Interest rates have risen from record lows as investors expect a decrease in the Federal Reserve’s bond buying. Yields on corporate debt worldwide have climbed to 3.72 percent through yesterday from 3.09 percent on May 2, according to the Bank of America Merrill Lynch Global Corporate & High Yield index.