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    MOODYS CORP /DE/ (MCO)

    Q2 2024 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$450.36Last close (Jul 22, 2024)
    Post-Earnings Price$450.23Open (Jul 23, 2024)
    Price Change
    $-0.13(-0.03%)
    • Moody's achieved its highest Annualized Recurring Revenue (ARR) growth rate this quarter, over 10%, with Decision Solutions growing at 13%, aligning with medium-term targets.
    • The company has a healthy sales pipeline and is experiencing strong demand for its products, including shorter sales cycles for its gen AI offerings among early adopters.
    • Despite pressures in certain sectors, Moody's continues to invest in innovation and product development, and has seen the highest volume of sales meetings post-pandemic, indicating strong customer engagement and potential for future growth.
    1. Issuance Pull-Forward and Outlook
      Q: Does pull-forward issuance affect future periods?
      A: Management acknowledged that while there has been pull-forward issuance both within the year and from 2025, it remains within historical ranges and doesn't alter their outlook for future issuance. They don't expect any material impact on 2025 issuance due to the pull-forward activity seen this year.

    2. Moody's Analytics ARR Guidance and MSCI Partnership
      Q: How does the MSCI partnership affect ARR guidance?
      A: The MSCI partnership involves transitioning to MSCI's ESG scores and integrating them into Moody's solutions, which may impact the sales pipeline and retention in the near term. However, management views this as a positive medium-term development, expecting benefits to materialize in 2025. The ESG scoring and data business is a small part of overall ESG and climate offerings.

    3. Strategic Investments in AI and New Products
      Q: What's the progress and impact of AI investments?
      A: Moody's is on track with its AI investments, launching several products like Research Assistant and seeing encouraging signs with increased customers and usage. While not materially impacting revenue yet, management is confident that AI-driven solutions will drive growth over time, with partnerships extending potential monetization pathways.

    4. Medium-Term Growth Targets for MA
      Q: Are you rethinking medium-term growth targets?
      A: Management remains confident in their medium-term targets, citing the highest ARR growth rate achieved this quarter at over 10%, with Decision Solutions growing at 13%. Despite a tougher environment, they see no need to change the outlook and will revisit targets annually.

    5. Commercial Real Estate Market Concerns
      Q: How does commercial real estate affect the banking sector?
      A: Management is monitoring commercial real estate, particularly the office sector, but doesn't foresee immediate significant impact on rated banks. They note that Class A office properties have held up well, and they're utilizing their data and models to assess potential stress scenarios.

    6. Data & Information Revenue Growth Deceleration
      Q: Why did Data & Information revenue growth slow?
      A: The Data & Information subsegment saw organic revenue growth decelerate to 8% in Q2 from 12% in Q1 due to product mix and contract nature. First-half growth averaged 10%, which management sees as reflective of business performance and expects similar growth for the full year.

    7. MA Revenue Growth Guidance
      Q: Should we expect lower MA revenue growth?
      A: Management anticipates MA revenue growth in the third quarter to align with Q2 levels before ticking back up to the higher end of high single-digit growth in Q4. Recurring revenue grew by 9% in Q2, and similar growth rates are expected throughout the year, while transactional revenue is declining.

    8. Tighter Purchasing Patterns Impact
      Q: How are tighter purchasing patterns affecting you?
      A: Cost pressures in the banking and asset management sectors are leading to some pressure on upsells, pricing, and retention rates, particularly with the CreditView offering. Management notes the environment is consistent with earlier in the year and is focusing on articulating their value proposition.

    9. Insurance ARR Growth and Weather Impact
      Q: Will active weather season boost insurance ARR?
      A: While the insurance ARR grew by 14%, management doesn't expect the upcoming active weather season to immediately increase revenue or ARR. However, increased focus on climate risk is driving demand for their solutions over time, especially with their SaaS platform.

    10. Land and Expand Strategy for MA Growth
      Q: What factors will accelerate MA growth?
      A: Management is focusing on a land-and-expand strategy, leveraging cross-sell opportunities with banks and insurance companies, and expanding into corporates with use cases like sales optimization and supplier risk. Recent sales wins with multinational companies reinforce confidence in driving growth.

    Research analysts covering MOODYS CORP /DE/.