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Fitch Upgrades Moody's Outlook to Positive on Strong Cash Flow and Diversification
Fitch Ratings has affirmed Moody’s Corporation’s (NYSE:MCO) Long-Term Issuer Default Rating (IDR) at 'BBB+' and revised the company's outlook to Positive from Stable. The rating agency cited Moody's strong market leadership, growing free cash flow, and consistent financial policies as key drivers for the improved outlook.
Rationale for the Outlook Change
Fitch highlighted Moody's robust and profitable business model, which benefits from low capital intensity and strong operating leverage. A key factor in the decision was the successful diversification of its revenue streams beyond traditional credit ratings.
The Moody's Analytics division was noted as a significant contributor to the company's credit profile, providing substantial recurring revenue. According to Fitch, this segment now accounts for more than 40% of Moody's total revenue, adding stability and offsetting the cyclicality of the ratings business.
Financial Health and Future Expectations
AdFitch underscored Moody's strong financial position. The company ended 2025 with an EBITDA leverage of 1.7x and maintains significant liquidity, including over $2 billion in cash, an undrawn revolver, and a $1 billion commercial paper program.
Looking ahead, Fitch's rating assumptions project Moody's will maintain its financial discipline. The agency's base case includes:
- EBITDA margins sustained above 50% in future years.
- EBITDA leverage remaining below 2.0x.
- Continued capital returns to shareholders via dividends and share repurchases.
A future upgrade to Moody's rating is possible if the company continues its growth trajectory while maintaining its strong margin and free cash flow profile, Fitch stated.