MOODY’S CORP. $30(New York symbol MCO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 234.2 million; Market cap: $7.0 billion; Price-to-sales ratio: 3.5; Dividend yield: 1.5%; TSINetwork Rating: Average; www.moodys.com) provides independent credit ratings and other information on bonds and other securities. Credit ratings account for 70% of Moody’s revenue. It gets the remaining 30% from selling credit-assessment software to banks and other lenders.
As the economy improves, more businesses are issuing new bonds to fund expansion projects. That’s pushing up demand for Moody’s credit ratings.
As a result, Moody’s revenue rose 13.1% in 2010, to $2.0 billion from $1.8 billion in 2009. Revenue from the U.S. (54% of overall revenue), rose 18.3%. Revenue at the company’s international operations (46% of revenue) rose 7.5%.
Moody’s earnings rose 26.3% in 2010, to $507.8 million from $402.0 million in 2009. Earnings per share rose 27.2%, to $2.15 from $1.69, on fewer shares outstanding. Unusual items, including gains from tax settlements, added $0.17 a share to Moody’s 2010 earnings. Without these items, earnings per share would have risen 17.2%.
The company is in a good position to keep expanding, particularly in Europe. Its long-term debt of $1.2 billion is a low 17% of its market cap, and it holds cash of $672.3 million, or $2.87 a share.
Moody’s trades at 13.8 times the $2.17 a share it will probably earn in 2011. The company also raised its quarterly dividend by 9.5%, to $0.115 a share from $0.105. The new annual rate of $0.46 yields 1.5%.
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