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Must-know: Eton Park sells stake in Moody’s

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Nov. 20 2020, Updated 1:25 p.m. ET

Eton Park exits position in Moody’s

Eric Mindich’s Eton Park Capital Management added new positions in Allergan Inc. (AGN), Armstrong World Industries (AWI), B/E Aerospace (BEAV), and AerCap Holdings (AER). Eton Park exited its positions in Equinix (EQIX), Moody’s (MCO), and Mead Johnson Nutrition (MJN) during 2Q14.

Eton Park exited a position in Moody’s Corp (MCO) that accounted for 2.7% of the fund’s first quarter portfolio.

Overview of Moody’s

Moody’s is a provider of credit ratings, credit, capital markets, and economic research, data, and analytical tools, among other services. It has two reportable segments.

The Moody’s Investors Service

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The Moody’s Investors (or MIS) segment consists of all credit rating activity. It publishes credit ratings on a wide range of debt obligations and the entities that issue such obligations in markets worldwide, including various corporate and governmental obligations, structured finance securities, and commercial paper programs.

The MIS segment consists of four lines of business: corporate finance, structured finance, financial institutions, and public, project, and infrastructure finance. These segments generate revenue principally from fees for the assignment and ongoing monitoring of credit ratings on debt obligations and the entities that issue such obligations in markets worldwide.

The Moody’s Analytics segment

The Moody’s Analytics (or MA) segment, which includes all of the company’s non-rating commercial activities, develops a wide range of products and services that primarily support financial analysis and risk management activities of institutional participants in global financial markets. The MA segment consists of three lines of business: research, data and analytics, enterprise risk solutions, and professional services.

Revenues increase on growth in bond ratings business

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In 2Q14, Moody’s reported revenue of $873.5 million, up 16% from $756 million for 2Q13. GAAP EPS of $1.48 increased 48% against the corresponding period last year. This included a $103 million non-cash, pre-tax gain, or $0.36 per share, resulting from Moody’s acquisition in June of a controlling interest in ICRA, an India-based provider of credit ratings and research.

MIS segment revenue was $621.7 million, up 16% from the corresponding period last year. Under this segment, global corporate finance revenue increased 22% from the corresponding period a year ago, primarily due to strong rated bank loans and speculative-grade bond issuance in both the U.S. and Europe.

Structured finance revenue also grew 14% due to increased ratings of collateralized loan obligations (or CLOs) in the U.S. and Europe.

Moody’s Analytics segment revenue is up 15%

Moody’s Analytics revenue was $251.8 million, up 15% from the second quarter of 2013. Revenue from research, data, and analytics of $144.7 million increased by 11%. This increase resulted from strong performance in credit research and content licensing. Enterprise risk solutions revenue of $67.2 million was up 12% due to growth in subscription and services revenue. Revenue from professional services of $39.9 million was up 41%, reflecting the December 2013 acquisition of Amba Investment Services.

Moody’s said it expects full-year 2014 revenue to grow in the low-double-digit percent range.

Eton Park also exited a position in Mead Johnson Nutrition (MJN) during 2Q14, which Market Realist will discuss in the last part of this series.

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