NYSE:MCO
MOODYS CORP /DE/
A leading global credit rating agency generating strong operating cash flow of $2.90B on $7.72B in revenue with a robust balance sheet anchored by over $6.37B in goodwill.
Key Metrics
Investment Thesis
Bull Case
MCO offers a compelling defensive growth profile with consistent revenue expansion and high free cash flow conversion rates suitable for income-focused portfolios. The regulatory framework protecting its rating agency status provides a durable competitive moat that justifies its valuation despite recent market volatility. Strong capital return programs returning over $2.3B annually to shareholders demonstrate management's confidence in long-term profitability.
Bear Case
Valuation multiples appear stretched relative to historical averages given the potential threat of regulatory changes that could disrupt the traditional rating fee model. The company faces increasing competition from alternative data providers and internal bank rating capabilities that may reduce reliance on external agencies over time. Significant goodwill of $6.37B represents a substantial impairment risk if market conditions deteriorate or if business segment performance underperforms expectations.
About MOODYS CORP /DE/
Moodys Corp (MCO) is a premier credit rating agency providing essential risk assessment services to investors, issuers, and regulators globally. The company serves diverse markets including corporate bonds, municipal securities, structured finance, and sovereign debt. Key products include standardized credit ratings, research reports, and data analytics platforms that drive capital market efficiency.
Analysis
Management Discussion
The company demonstrated robust financial health with operating cash flow of $2.90B significantly exceeding net income of $2.46B, indicating strong quality of earnings. Revenue growth accelerated to $7.72B in the latest period compared to $5.92B two years prior, driven by volume expansion and fee increases across corporate and municipal segments. However, significant cash outflows from financing activities totaling $3.06B reflect aggressive share repurchases of $1.61B and substantial dividend payments of $701M.
Industry Overview
The credit ratings industry operates within a highly regulated financial services sector where established players dominate due to stringent licensing requirements and data network effects. Market dynamics are shifting toward alternative risk metrics as investors seek transparency beyond traditional ratings, yet regulatory mandates continue to support incumbent agencies. Consolidation trends favor large incumbents capable of investing in technology infrastructure to meet evolving disclosure standards.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue | $5.47B | $5.92B | $7.09B | $7.72B |
| Cost of Revenue | $1.61B | $1.69B | $1.95B | $1.97B |
| Gross Profit | $3.85B | $4.23B | $5.14B | $5.75B |
| Operating Expenses | $1.97B | $2.09B | $2.27B | $2.39B |
| Operating Income | $1.88B | $2.14B | $2.88B | $3.35B |
| G&A | $1.53B | $1.63B | $1.74B | $1.80B |
| Stock-Based Comp | $169.0M | $193.0M | $220.0M | $232.0M |
| D&A | $331.0M | $373.0M | $431.0M | $480.0M |
| Amortization | $200.0M | $198.0M | $198.0M | $215.0M |
| Other OpEx | $445.0M | $460.0M | $533.0M | $591.0M |
| Non-Operating Income | $-123.0M | $-202.0M | $-176.0M | $-221.0M |
| Pre-Tax Income | $1.76B | $1.94B | $2.70B | $3.13B |
| Income Tax | $386.0M | $327.0M | $640.0M | $668.0M |
| Continuing Ops | $1.37B | $1.61B | $2.06B | $2.46B |
| Discontinued Ops | $0 | $0 | $0 | $0 |
| Net Income | $1.37B | $1.61B | $2.06B | $2.46B |
| Minority Interest | $0 | $1.0M | $1.0M | $3.0M |
| Net to Common | $1.37B | $1.61B | $2.06B | $2.46B |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Current Assets | $4.09B | $4.34B | $5.29B | $5.19B |
| Cash & Equivalents | $1.77B | $2.13B | $2.41B | $2.38B |
| Marketable Securities | $90.0M | $63.0M | $566.0M | $64.0M |
| Accounts Receivable | $1.65B | $1.66B | $1.80B | $2.02B |
| Other Current Assets | $583.0M | $489.0M | $515.0M | $714.0M |
| Long-Term Assets | $10.26B | $10.28B | $10.21B | $10.64B |
| PP&E (Net) | $502.0M | $603.0M | $656.0M | $722.0M |
| Intangibles | $2.21B | $2.05B | $1.89B | $1.87B |
| Goodwill | $5.84B | $5.96B | $5.99B | $6.37B |
| Operating Leases | $346.0M | $277.0M | $216.0M | $282.0M |
| LT Investments | $87.0M | $100.0M | $98.0M | $110.0M |
| Other LT Assets | $1.08B | $1.11B | $1.23B | $1.18B |
| Total Assets | $14.35B | $14.62B | $15.51B | $15.83B |
| Current Liabilities | $2.38B | $2.50B | $3.60B | $2.98B |
| Accounts Payable | $52.0M | $23.0M | $53.0M | $62.0M |
| Current Debt | — | — | $697.0M | $0 |
| Current Leases | $106.0M | $108.0M | $102.0M | $95.0M |
| Deferred Revenue | $1.26B | $1.32B | $1.45B | $1.58B |
| Taxes Payable | $86.0M | $108.0M | $144.0M | $146.0M |
| Other Current Liab | $867.0M | $938.0M | $1.11B | $1.09B |
| Long-Term Liabilities | $9.29B | $8.65B | $8.18B | $8.64B |
| Long-Term Debt | $7.39B | $7.00B | $6.73B | $6.99B |
| LT Operating Leases | $368.0M | $306.0M | $216.0M | $262.0M |
| Other LT Liab | $1.45B | $1.27B | $1.18B | $1.33B |
| Total Liabilities | $11.66B | $11.15B | $11.78B | $11.62B |
| Shareholders' Equity | $2.69B | $3.48B | $3.73B | $4.21B |
| Retained Earnings | $13.62B | $14.66B | $16.07B | $17.85B |
| AOCI | $-643.0M | $-567.0M | $-638.0M | $-500.0M |
| Treasury Stock | $11.51B | — | — | — |
| Total L&E | $14.35B | $14.62B | $15.51B | $15.83B |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Net Income (CFO) | $1.37B | $1.61B | $2.06B | $2.46B |
| Non-Cash Adjustments | $42.0M | $504.0M | $37.0M | $23.0M |
| Working Capital Changes | $58.0M | $39.0M | $742.0M | $416.0M |
| Cash from Operations | $1.47B | $2.15B | $2.84B | $2.90B |
| Capital Expenditures | $283.0M | $271.0M | $317.0M | $326.0M |
| Cash from Investing | $-262.0M | $-247.0M | $-1.06B | $2.0M |
| Share Buybacks | $983.0M | $490.0M | $1.29B | $1.61B |
| Dividends Paid | $515.0M | $564.0M | $620.0M | $701.0M |
| Cash from Financing | $-1.21B | $-1.58B | $-1.45B | $-3.06B |
| FX Effect | $-46.0M | $41.0M | $-58.0M | $136.0M |
| Net Change in Cash | $-42.0M | $361.0M | $278.0M | $-24.0M |
| Beginning Cash | $1.81B | $1.77B | $2.13B | $2.41B |
| Ending Cash | $1.77B | $2.13B | $2.41B | $2.38B |
Frequently Asked Questions
How does MOODYS CORP /DE/ make money?
Corporate credit ratings for public and private issuers, municipal bond ratings for government entities, structured finance assessments covering asset-backed securities, and regulatory capital solutions for banks and insurers worldwide.
What are the main risks for MCO?
Potential regulatory shifts eliminating the necessity for external third-party ratings could erode core revenue streams, geopolitical instability affecting sovereign debt markets in key jurisdictions, concentration risk in specific asset classes like high-yield corporate bonds, and litigation exposure from rating downgrades.
What is MCO's competitive advantage?
Regulatory moat providing near-monopoly status on standardized credit ratings required by global regulators, massive first-mover advantage with decades of historical default data improving predictive accuracy, and high switching costs due to the network effects of issuer and investor reliance.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.