UPDATE: Benchmark Downgrades Moody's on Slowing Growth and Limited Upside
In a report published on Monday, Benchmark analyst Edward J. Atorino downgraded Moody's (NYSE: MCO) from Buy to Hold and maintained a $71 price target on the company.
In the report, Benchmark commented that, "Despite generally favorable bond issuance trends and continued expected strength at Moody's analytics, y/y comparisons for Moody's (MCO) become significantly more difficult in 2H13, with Ratings revenue comping against 35% and 42% growth rates in 3Q12 and 4Q12, respectively. As such, Ratings revenue growth could fall to the low-single digits in 3Q13 and possibly be negative in 4Q13. Higher costs are also expected to limit EPS growth in 2H13. For the year, we expect total revenues of $2.93 billion, up 7.5%, with Ratings revenues of $2.01 billion, up 7% y/y, and Analytics up 9% y/y. EPS is expected to be $3.54, up 16% y/y, with EBITDA of $1.3 billion, up 10% y/y. While we are raising our price target from $60 to $71 based on a P/E multiple of 20x 2013E EPS, which would be the highest P/E multiple in 4 years, we don't see sufficient upside to maintain our Buy rating, and thus are lowering our recommendation to Hold."
Moody's closed on Monday at $65.00.
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