Earnings Preview: The McGraw-Hill Companies

The McGraw-Hill Companies (MHP) is expected to report Q3 earnings before market open Tuesday, October 28, with a conference call scheduled for 8:30 am.

Guidance

Analysts are looking for a profit of $1.24 on revenue of $2.16B. The consensus range is $1.19 to $1.29 for EPS, and revenue of $2.1B to $2.23B, according to First Call. In July, the company forecast FY08 EPS $2.65 to $2.75 vs. First Call consensus of $2.69.

Analyst Views

According to Zacks Equity the outlook for the company's Financial Services unit is "murky" as the CDO and mortgage-backed securities markets have dried up. The firm notes that the unit's income was down 22% in Q2 and will likely remain weak through 2009; however, the firm says weakness should be partially offset by mid-to-high single digit growth in the Information & Media and Education segments.

In a September note Citigroup removed McGraw-Hill from the Top Picks Live List. The firm believes the failure of the Emergency Economic Stabilization Act puts the company's financial services revenue at risk. Until banks and other credit providers repair their own balance sheets, the firm says transaction volume should be very light. Additionally, Citi notes that the Information & Media segment is "susceptible to weaker consumer spending" and declining corporate profits as they can impact advertising budgets and business-to-business spending.