Moody’s Corporation MCO is scheduled to report first-quarter 2018 results on Apr 27, before the opening bell. The company is expected to report stable revenues in its Corporate Finance line, the largest revenue contributor at the Moody’s Investors Service (“MIS”) division.

Backdrop for bond issuance during the first quarter was not quite favorable. Rising interest rates are likely to have slowed down corporates’ involvement in debt issuances to some extent. Hence, investment grade bond, high yield bond and leveraged loan issuances volume deteriorated year over year.

Nevertheless, Corporate Finance revenues are expected to remain stable. The Zacks Consensus Estimate is $353 million for the to-be-reported quarter.

Nonetheless, quarterly issuance volume for commercial mortgage-backed securities, collateralized loan obligations and asset backed securities was healthy. Therefore, Moody’s will likely witness a rise in Structured Finance revenues in the to-be-reported quarter. The Zacks Consensus Estimate is $116 million, reflecting 16% growth from the prior-year quarter.

Further, MIS division’s another revenue source — Financial Institutions — is anticipated to report $117 million of revenues, up 4.5% from the prior-year quarter.  Public, Project and Infrastructure Finance unit revenues are projected to remain stable year over year at $98 million as municipal bond issuance slowed in the to-be-reported quarter.

Overall, the MIS division is projected to witness year-over-year growth in the top line. The Zacks Consensus Estimate for the division’s revenues is $688 million, reflecting an increase of 3%.

Other Factors at Play

Higher revenues from Moody’s Analytics (“MA”) division: Moody’s continues to pursue growth in areas outside the core credit ratings service. Given the rise in demand for analytics, the company’s MA division is expected to show a rise in revenues. The division’s all three business units are anticipated to witness higher revenues in the to-be-reported quarter. So, the Zacks Consensus Estimate for its revenues of $422 million indicates a surge of 37.5% from the prior-year quarter.

Strategic deals/investments to support revenues: Moody’s is likely to show revenue growth on the back of its strategic acquisitions and investments. These have increased the scale and cross-selling opportunities across products and vertical markets. However, strength of the U.S. dollar is likely to impact quarterly revenues to some extent.

Expenses to remain high: As Moody’s continues with its inorganic growth strategy, acquisition and restructuring costs are expected to remain high. So, overall expenses are anticipated to rise during the quarter.

Now, let’s see what our quantitative model predicts.

According to our proven model, Moody’s has the right combination of two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: Earnings ESP for Moody’s is +3.09%.

Zacks Rank: Moody’s carries a Zacks Rank of 3.

The Zacks Consensus Estimate for earnings of $1.78 reflects a year-over-year improvement of 21.1%. Also, the consensus estimate for sales of $1.10 billion reflects 12.6% growth from the prior-year quarter.

Moody’s Corporation Price and EPS Surprise

 

Moody’s Corporation Price and EPS Surprise | Moody’s Corporation Quote

Other Stocks to Consider

Here are a few other finance stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

The Earnings ESP for SVB Financial Group SIVB is +1.38% and the stock carries a Zacks Rank of 3. The company is scheduled to release first-quarter results on Apr 26. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cullen/Frost Bankers, Inc. CFR has an Earnings ESP of +0.31% and carries a Zacks Rank of 3. It is slated to report results on Apr 26.

Eaton Vance Corp. EV has an Earnings ESP of +0.84% and a Zacks Rank #3. It is set to report results on May 23.

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