Moody’s Tops Second-Quarter Profit Estimates on Ratings

Moody’s Corp., owner of the second-largest credit-ratings company, reported quarterly profit that beat analysts’ estimates as higher corporate bond issuance boosted demand for credit rankings.

Second-quarter net income climbed to $319.2 million from $225.5 million a year earlier, the New York-based company said today in a statement. Profit excluding certain items was $1.12 a share, exceeding the $1.02 average estimate of 11 analysts in a Bloomberg survey.

Corporate bond sales in the U.S. surged to a record $468.8 billion in the three months ended June 30, up from $370.3 billion in the same period last year, according to data compiled by Bloomberg. Since 2008, Moody’s has reported five straight years of increasing annual revenue as companies tapped debt markets to take advantage of record-low borrowing costs.

“We had a white-hot second quarter” in terms of speculative-grade bond issuance, Chief Financial Officer Linda Huber said today on a conference call with analysts. “We’re cautious, as we’re usually cautious, about whether that pace can continue.”

Moody’s increased its forecast for revenue growth to the “low-double-digit percent range” in 2014, up from a previously announced “high-single-digit percent range,” the company said in the statement. Moody’s said it still expects full-year profit excluding certain items of $3.90 to $4 a share.

Shares Fall

Moody’s fell from a record high, declining 0.9 percent to $91.62 in New York. The shares have gained 16.8 percent this year, compared with a 7 percent rise in the Standard & Poor’s 500 Index. Moody’s surged 55.9 percent last year, almost double the S&P’s 29.6 percent gain.

Moody’s said revenue in the quarter rose 16 percent to $873.5 million from $756 million a year earlier. Sales at Moody’s Investors Service, the credit ratings unit that accounts for about 70 percent of the firm’s revenue, advanced 16 percent to $621.7 million, with grading of company bond sales climbing 22 percent to $320.9 million and ratings on structured-finance debt rising 13.8 percent to $110.6 million.

Revenue from Moody’s Analytics, which distributes research and data, increased 15 percent to $251.8 million.

Competitor McGraw Hill Financial Inc., owner of the largest credit-rating company, Standard & Poor’s, is scheduled to report second-quarter earnings July 29.

Warren Buffett’s Berkshire Hathaway Inc. is Moody’s biggest shareholder with an 11.5 percent stake valued at about $2.3 billion, Bloomberg data show.

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