MBIA Gets Moody's Top Rating, Pfizer Downgraded: Is This for Real?

Let's compare the financials of two stocks: MBIA (MBI) which has Moody's top rating of Aaa and Pfizer (PFE) recently downgraded by Moody's to Aa1 and by Fitch to AA-Plus from AAA. Here are two recent downgrades of Pfizer.

December 12, 2007
Pfizer loses top "AAA" rating from Fitch

December 13, 2007
Pfizer's 900 mln eur new senior unsecured notes rated 'Aa1' - Moody's

Pfizer Financials



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MBIA Financials



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What is Moody’s rating scale?

Moody's Rating Scale runs from a high of Aaa to a low of C, and comprises 21 notches. It is divided into two sections, investment grade and speculative grade. The lowest investment grade rating is Baa3. The highest speculative-grade rating is Ba1.

Long-Term Debt Ratings (maturities of one year or more):

Investment Grade
Aaa – “gilt edged”
Aa1, Aa2, Aa3 – high-grade
A1, A2, A3 – upper-medium grade
Baa1, Baa2, Baa3 – medium grade

Speculative Grade
Ba1, Ba2, Ba3 – speculative elements
B1, B2, B3 – lack characteristics of a desirable investment
Caa1, Caa2, Caa3 – bonds of poor standing
Ca – highly speculative
C – lowest rating, extremely poor prospects of attaining any real investment standing

Compare Financials

• Profit margin -61.76% vs. +17.07%
• Return on Equity -35.54% vs. +12.13%
• Revenue $3.12 Billion vs. $48.61 Billion
• Earnings Per Share -$15.22 vs. +$1.20
• Total Cash $5.73 Billion vs. $20.30 Billion
• Total Debt $17.44 Billion vs. $8.69 Billion

Do the financials of MBIA look "gilt edged"?

Heck, do they look investment grade at all?

With that, I invite you to read two posts I wrote yesterday in regards to MBIA.

• S&P Sniffs Horse Hockey, Calls It A Rose
• MBIA has Questions, Cancels Dividend, CEO Feels Pinched

Is there any other way to interpret the above ratings other than incompetence or corruption? If there is, can someone please tell me what it is?

Addendum:
Minyan Michael noticed the date of the downgrade from Moody’s as originally published was from 2006. I had several downgrades I was looking at and did not put in the most recent ones. The article above now shows the correct links, from December 2007.

Comments

[Barry Robbins:]

I think after the regulators, banks and ratings agencies got together and figured out there was no good solution to the monoline insurers' problems - they decided to do nothing at all, and hope the problem just goes away.

2008 Feb 27 11:48 AM

[Dana Cole:]

FINALLY someone else notices that the price of Pfizer is being manipulated and held down artificially!

2008 Feb 27 12:12 PM

[Dana Cole:]

Something very strange is definitely going on. Every since Pfizer initially dropped below 23 in 2004, volume has essentially doubled. The company looks better than it did back then and has tons of cash. Management is making all the right decisions, cutting costs, very cheaply picking up other companies here and there, and the dividend keeps increasing. The Pfizer website also looks terrific. Yet despite all the quiet buying and selling going on, there is very little news except the same old stories that started the long march down. It almost appears as if Pfizer is deliberately being held down until certain funds have acquired enough shares to really make money on the upside. If this turns out to be the case, the turnaround might not be too far off, as this bouncing along the bottom has been happening for a long time now.
P.S. Couldn't find this article on SA's front page. Why not?

2008 Feb 27 02:32 PM