Moody's Corporation MCO has been growing organically as well as inorganically backed by its strong capital position. The company is pursuing growth in areas outside the core credit ratings service for public fixed-income securities. It has increased its exposure to the banking and insurance industry, branching into the emerging and fast-growing professional services and enterprise risk-solutions’ sectors.

Further, a positive trend in estimate revisions reflect optimism over the company’s earnings growth prospects. The Zacks Consensus Estimate for Moody’s current-quarter earnings has moved up one cent per share over the last 60 days. Also, the current year’s earnings estimates have climbed 3.2%. As a result, the stock currently carries a Zacks Rank #2 (Buy).

Shares of Moody’s have rallied 45.1% year to date, substantially outperforming the industry’s growth of 7%.

What Makes Moody’s a Solid Pick?

Earnings Strength: Moody’s recorded an earnings growth rate of 12.9% over the last three to five years compared with 7.4% for the industry it belongs to. The earnings growth rate for the current and the next year is anticipated to be 14.4% and 11.9%, respectively.

Further, the company has an impressive earnings surprise history, outpacing the Zacks Consensus Estimate in each of the trailing four quarters.  It delivered an average surprise of 14.1% for this period.

Revenue Growth: Organic growth remains strong at Moody’s. Revenues witnessed a compound annual growth rate of 7.2% over the last five years (2012-2016). Further, the top line is expected to increase 10.3% in 2017 compared with no growth for the industry.

Impressive Capital Deployment: Moody’s capital deployment plan is commendable. In December 2016, the company announced a 3% dividend hike. Further, Moody’s had remaining repurchase authorization worth nearly $600 million, as of Jun 30, 2017. Given its solid liquidity position and earnings strength, the company should be able to sustain this level of capital deployment.

Strong Inorganic Growth: Moody’s has grown significantly over the years through several strategic acquisitions that provided it with increased scale and cross-selling opportunities across products and vertical markets. Recently, the company acquired Amsterdam, Netherlands-based Bureau van Dijk. In February 2017, it acquired the structured finance data and analytics business of Frankfurt-based SCDM. The company will continue to pursue acquisitions (especially in Asia and Latin America) that are strategic fits and suitable for diversifying revenue base.

Some better-ranked stocks from the finance space are The Bank of Nova Scotia BNS, AeroCentury Corp. ACY and ING Group, N.V. ING, each sporting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bank of Nova Scotia witnessed an upward earnings estimate revision of 8.3% for the current year, in the last 60 days. Its share price increased 17.7% in the past 12 months.

Shares of AeroCentury have gained 45.5% in a year. The Zacks Consensus Estimate for current-year earnings has been revised 9.9% upward over the last 60 days for this leasing company.

ING Group has witnessed 5.4% upward earnings estimate revision for the current year, in the past 60 days. Moreover, its shares have gained 52.1% over the past 12 months.

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Moody's Corporation (MCO) : Free Stock Analysis Report
 
Bank of Nova Scotia (The) (BNS) : Free Stock Analysis Report
 
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ING Group, N.V. (ING) : Free Stock Analysis Report
 
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