Moody’s high yield ratings revenue drops 40% while investment grade rises 18%

Moody's $MCO Corp. reported third-quarter adjusted earnings of $4.14 a share on Wednesday as revenue at its Moody's Investors Service ratings unit fell 1% from a year earlier. Adjusted earnings rose 6% from $3.92 a share in the prior-year period. That missed the $4.27 midpoint of analyst forecasts, according to Bloomberg.

Moody's Investors Service revenue totaled $1.087 billion. Analysts had estimated $1.132 billion, according to Bloomberg. The company said lower Leveraged Finance issuance drove the decline, which came against a record prior-year period. Yields that kept climbing curbed how much debt corporations sold, according to Bloomberg.

Moody's stock slid to an intraday low of $455.65 early in the session, down 4.14% at the worst point. That was the biggest intraday drop since July, according to Bloomberg.

Corporate Finance revenue at the ratings unit fell 8% to $530 million. High Yield revenue dropped 40% and Leveraged Loans revenue declined 27%. Investment Grade revenue rose 18%, which the company attributed to large corporate financing, particularly in the technology sector. Transaction revenue at the unit fell 5% to $714 million.

Company-wide revenue rose 1% to $2.02 billion, or 3% on an organic constant currency basis. Net income attributable to Moody's rose to $734 million from $646 million a year earlier, with diluted earnings of $4.24 a share against $3.60 in the prior-year period. The operating margin was 44.8%, down from 45.7%.

Moody's Analytics revenue rose 3% to $936 million, or 8% on an organic constant currency basis. Annualized recurring revenue at the unit rose 8% to $3.7 billion. The unit's adjusted operating margin was 35.3%, up from 34.3% a year earlier.

Moody's reaffirmed its full-year 2026 guidance, the company said. It expects diluted earnings of $16.00 to $16.50 a share and adjusted diluted earnings of $16.50 to $17.00 a share. The company also kept its free cash flow forecast at $2.7 billion to $2.9 billion.