Moody's stock slides after FY2022 guidance cut on market volatility

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Moody’s (NYSE:MCO) stock drops 7.2% in Monday premarket trading after the credit rating and financial and market information company cut its 2022 guidance as it expects market volatility to continue, leading to fewer companies issuing debt.

Corporations and governments use Moody’s (MCO) to rate their debt, which helps determine the pricing of the debt issues.

The company pruned its FY2022 adjusted EPS guidance to $9.85-$10.35 from its previous range of $10.75-$11.25; bringing the new range far below the average analyst estimate of $11.88.

Revenue for Moody’s Investor Services (“MIS”) fell 20% Y/Y in Q1 2022 as geopolitical concerns, rising yields, and elevated market uncertainty affected issuance in all asset classes. Foreign currency translation hurt MIS revenue by 1%, the company said.

Corporate finance revenue of $417M dropped 31% Y/Y, largely due to the decline in leveraged finance issuance after a record period in 2021. While global investment grade activity slowed in Q1, Moody’s (MCO) said it saw a notable rebound in March.

While revenue from financial institutions and from public, project, and infrastructure finance declined from a year ago, structured finance revenue increased 24% Y/Y, on higher commercial and residential mortgage-backed security issuance, offsetting a decline in collateralized loan obligation refinancing activity.

Moody’s (MCO) Analytics Q1 revenue increased 23% to $695M, which includes it compliance offerings, credit research products and ratings feeds. Decision Solutions revenue of $334M jumped 48% led by KYC and Compliance, further supported by demand for risk and finance software.

Conference call at 11:30 AM ET.

Earlier, Moody’s (MCO) non-GAAP EPS of $2.89 in-line, revenue of $1.52B beats by $10M