Credit Rating Agencies Could Feel An Immediate Impact From Brexit
Credit issuance is typically negatively impacted by uncertainty, Barclays’ Manav Patnaik said in a report, while reducing the EUR issuance forecasts by ~20 percent on Brexit news. The analyst commented that Moody's Corporation (NYSE: MCO) and S&P Global Inc (NYSE: SPGI) are likely to “feel the most immediate impact.”
Analyst Manav Patnaik maintained Overweight ratings on both the credit rating agencies, with price targets of $95 for Moody’s and $115 for S&P Global, saying that he would wait for “the dust to settle” before evaluating the ratings and price targets.
Global credit issuance for 2016 is now expected to decline 10 percent y/y, compared with the prior forecast of a decline of 5 percent and the "flat to modestly up" expectations at the beginning of the year.
The EPS estimates for Moody’s for FY16 and FY17 have been reduced from $4.60 to $4.40 and from $5.20 to $4.85, respectively, while those for S&P Global have been lowered from $5.15 to $5.00 and from $5.75 to $5.55. Patnaik noted that the downward top-line revisions had been partially offset by FX benefits.
“We would also note that there are likely many other moving parts that would impact our numbers - and unfortunately initial indications suggest more downside than upside. As a result, we wonder if we are entering a similar period to 1Q16, when MCO/SPGI shares were down 20%+ peak-to-trough (vs. SPX -12%),” the analyst added.
Latest Ratings for MCO
|Aug 2016||Argus Research||Maintains||Buy|
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