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Moody's (MCO) Q1 Earnings: What's in the Cards This Time?

Moody's Corporation MCO is set to report first quarter 2016 results on Apr 29, before the market opens. Last quarter, the company posted a positive earnings surprise of 3.81%. Over the past four quarters, the company has posted an average positive earnings surprise of 5.72%. Let’s see how things are shaping up for this announcement.

Factors to Consider

Moody's business has been impacted by increasing slowdown in issuance for high-yield bonds, as well as CMBS.

Also, Moody’s faces significant economic risks associated with the volatile macro environment and its effect on the financial markets and soft bond issuance, which also results in sluggish demand for credit ratings.

Nonetheless, the company along with Standard & Poor’s, holds a dominant position in the duopolistic credit rating industry. It has also gained significant market share in the analytics business, which is not correlated with the volatility of interest rates and should add stability to the top line. Additionally, over the last couple of years, it has increased its exposure to the banking and insurance industry, branching into the emerging and fast growing professional services and enterprise risk solutions sectors.

The company has also increased its quarterly dividend and initiated new share repurchase programs, which are positives.

Earnings Whispers

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

Zacks ESP: Moody’s has an Earnings ESP of -0.94%. This is because the Most Accurate estimate stands at $1.06 per share while the Zacks Consensus Estimate is pegged higher at $1.07 per share.

Zacks Rank: Moody has a Zacks Rank #4 (Sell).We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are a few companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Align Technology Inc. ALGN, with an Earnings ESP of +5.13% and a Zacks Rank #1(Strong Buy).

Inphi Corp. IPHI with an Earnings ESP of +12.50% and a Zacks Rank #1.

Quotient Technology Inc. QUOT with an Earnings ESP of +18.18% and a Zacks Rank #1.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 DaysClick to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
MOODYS CORP (MCO): Free Stock Analysis Report
ALIGN TECH INC (ALGN): Free Stock Analysis Report
INPHI CORP (IPHI): Free Stock Analysis Report
QUOTIENT TECH (QUOT): Free Stock Analysis Report
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