Is Moody's (MCO) Poised to Beat Earnings Estimates? - Analyst Blog

Moody's Corporation MCO is set to report first quarter 2014 results on Apr 25. Last quarter it posted a 10.4% positive surprise. We note that Moody's has outperformed the Zacks Consensus Estimate in the preceding four quarters with an average positive surprise of 8.3%.

Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Moody's reported better-than-expected fourth quarter results with both its earnings and revenue convincingly beating the Zacks Consensus Estimate. Moreover, management provided an upbeat outlook for full year 2014.

We believe that Moody's remains a solid franchise in rating debt instruments based on its diversified credit research business model and international growth opportunities. Additionally, accretive acquisitions, improving liquidity, higher dividend payout and aggressive share buybacks are the other positives.

However, regulatory concerns will remain an overhang on the stock going forward. Moreover, increasing competition from the likes of privately held Fitch, McGraw Hill Financial's MHFI Standard & Poor's division, Dun & Bradstreet DNB and Euronet EEFT is a major concern going forward.

Earnings Whispers?

Our proven model does not conclusively show that Moody's is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Most Accurate estimate coincides with the Zacks Consensus Estimate of 90 cents. Hence the difference or ESP is 0.0%.

Zacks Rank #3 (Hold): Moody's Zacks Rank #3 (Hold) when combined with an ESP of 0.00% makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.