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Earnings Results: Moody’s cuts earnings view on double-digit drop in debt issuance

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Moody’s Corp. shares fell Monday after the debt rating firm cut its earnings target for the year and said it expects double-digit drops in overall debt issuance in the face of volatile markets.

Moody’s
MCO,
-5.30%

stock dropped 5% on its expectation that corporate debt issuance of all stripes will drop by mid-teens percentage levels in 2022, with more modest decreases in the second half of the year.

Fear of a recession remains a headwind in corporate debt activity, but so far Moody’s doesn’t see any severe economic slowdown currently.

Moody’s said it expects adjusted 2022 earnings of $10.75 a share to $11.25 a share, short of the analyst expectation of $11.92 a share in a survey by FactSet.

The New York company also said it now expects flat revenue, which is short of the Wall Street forecast for revenue to increase to $6.42 billion in 2022 from $6.22 billion in 2021, according to FactSet data.

In the U.S., debt issuance from infrequent issuers was down sharply as companies sat out market volatility and create a potential backlog of activity. M&A activity has also been muted, which in turn reduces the need to issue debt.

Despite these problems, Moody’s strongly believes the downturn in debt issuance remains cyclical and not fundamental to the business.

Moody’s reported first-quarter profit of $498 million, or $2.68 a share, down from $736 million, or $3.90 a share in the year-ago quarter. Adjusted net income totaled $2.89 a share. Revenue fell 5% to $1.52 billion.

Analysts expected earnings of $2.90 a share and revenue of $1.51 billion.

Prior to Monday’s trades, Moody’s shares were down 19% in 2022, compared to a loss of 13.3% by the S&P 500 SPX, -0.59%.

Also Read: Recession is ‘almost inevitable’: former Fed’s Ferguson says

Project Syndicate: The next debt crisis is hiding in plain sight

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