Moody’s, a top credit ratings agency and a favorite of Warren Buffett, recently reported impressive second-quarter earnings that surpassed expectations. The company saw a 22% increase in revenue and a 46% surge in net income year-over-year.

Despite some initial volatility in the stock price post-earnings, Moody’s has shown resilience and is up 16% year-to-date. This strong performance can be attributed to Moody’s dominant position in the credit ratings industry and its secondary business, Moody’s Analytics, which provides market data and intelligence.

Why is Buffett Such a Fan of Moody’s?

Warren Buffett has held Moody’s stock since 2000, highlighting the company’s strong moat and consistent earnings. Moody’s is a market leader in credit ratings with limited competition, making it a reliable investment for long-term growth.

Moody’s core business, Moody’s Investors Service (MIS), generated $1 billion in revenue in Q2, while Moody’s Analytics saw a revenue increase of 7% year-over-year. This diversified revenue stream has allowed Moody’s to outperform the market and raise its guidance for the full year.

Beating the S&P 500, Raising Its Guidance

Moody’s has delivered impressive returns over the past decade, with an annualized return of 17.4%. The company raised its revenue and EPS guidance for the year, expecting strong growth in credit issuance in 2024.

While Moody’s valuation may be high, it remains a solid long-term investment. Investors should consider waiting for a potential dip in the stock price before making a purchase.

Overall, Moody’s is a top pick for investors looking for steady growth and market-beating returns in the credit ratings industry.

Shares: