Moody's (MCO) strong issuance in Q4, up 33% compared to a year ago, drives Morgan Stanley's earnings per share estimates up by 5% and Ratings revenue growth to 16%, the firm said in a Tuesday note.

Despite strong tailwinds in 2026 and an upbeat environment, Morgan Stanley expects the company to guide conservatively to begin the year because of macro uncertainty, geopolitical tensions, and a weaker labor market.

Investors will focus on 2026 guidance in Q4. The brokerage is bullish on the 2026 outlook, as it expects the issuance environment to be more robust than the market currently anticipates. The firm's estimates remain significantly above Wall Street consensus for Moody's Ratings revenue.

Morgan Stanley models an 11% Ratings revenue growth for the company in 2026, well ahead of the 7% consensus estimate. It expects the company to guide on revenue growth conservatively for 2026 in the mid to high single digit range, the brokerage said.

Morgan Stanley's global strategists expect global issuance to rise 14% compared to a year ago, driven by corporate bond issuance. Continued recovery in mergers and acquisitions activity, AI datacenter financing, solid refinancing walls, and steady economic growth are the four key factors that support its above-consensus view on the 2026 issuance environment, the brokerage added.

With approximately 50% of revenue and 60% of profits being generated from its rating agency business, Moody's shares will be heavily tied to the issuance environment, according to the report.

Morgan Stanley kept an equal weight rating on Moody's and raised the price target to $526 from $520.

Price: 528.91, Change: -6.21, Percent Change: -1.16