Moody’s profits from rising rates

Article Excerpt

MOODY’S CORP. $62 (New York symbol MCO; WSSF Rating: Average) analyzes and rates securities issued by 200,000 businesses and government agencies in 100 countries. The company also provides software to banks and other financial institutions that help them manage their credit risk. Unlike the thrifts, Moody’s profits from rising interest rates. That’s because higher rates have spurred more demand for mortgage-backed securities and other investment vehicles linked to the strong housing market. That has also led to a sharp rise in the need for Moody’s ratings, since regulations ban most institutional investors from buying securities that fall below a certain rating. Consequently, it earned $0.48 a share (total $146.6 million) in the third quarter of 2005, up 50% from $0.32 a share ($95.5 million) a year earlier. Revenue grew 17.7%, to $421.1 million from $357.9 million. The company is now using its strong earnings to enhance its rating products. It recently paid $27 million for Inc., which provides economic research and analysis…

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