Moody's Corp, owner of one of the three major debt-rating agencies, reported a 56 percent rise in second-quarter profit, but cautioned that the second half of the year would be difficult. The company, which was sending a top executive to testify in Washington on Wednesday about rating agencies' roles in the financial crisis, counted higher profits in the second quarter because debt issuance rose from the same quarter a year ago.
But global corporate debt issuance stalled in June, and July appears weaker, according to Thomson Reuters data. The value of investment-grade corporate bond issues through July 26 was 44 percent lower than in June as the Greek debt crisis and political wrangling over the US debt ceiling continue. New junk bond issuance was 67 percent less. Moody's shares fell 4 percent to $35.91 in morning trading.
The company has played an accidental part in depressing bond issuance. As the agency has taken steps like warning that it may change the outlook on the United States' triple-A rating, and cutting sovereign ratings for Ireland and Portugal, some corporate bond issuers have grown reluctant to sell debt.
Moody's reported net income of $189 million, or 82 cents a share, compared with $121 million, or 51 cents a share, a year earlier. Revenue was $605 million, up 27 percent. Stripping out a tax benefit, the company earned 79 cents per share, beating analysts' average estimate by 22 cents per share, according to Thomson Reuters I/B/E/S.
Revenues were also better than expected, rising 5 percent from the first quarter even after a drop-off in bond issuance. The company raised its full-year profit forecast after earning more than it expected during the quarter. The company said expects to earn $2.38 to $2.48 a share this year, up from its previous guidance of $2.22 to $2.32. Moody's shares have risen 41 percent through Tuesday, but have levelled off because of a drop in the volume of new corporate bonds to rate. Many companies have used up their opportunities to refinance debt to get lower interest rates and have little appetite for more borrowing.
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