McGraw-Hill Beats Expectations

Apr.27.10 | About: S&P Global (SPGI)

The McGraw-Hill Companies Inc. (MHP), a publisher and provider of financial information and media services, reported first-quarter results before the opening bell today. The company recorded a robust 63.9% growth in net income to $103.3 million or 33 cents per share from $63.0 million, or 20 cents per share, in the year-ago period.

Quarterly results also topped the Zacks Consensus Estimate of 25 cents per share derived from 7 covering analysts. The better-than-expected results were primarily driven by a recovery in global bond markets, strong performance in US higher education and global energy information markets.
McGraw-Hill’s total revenue for the quarter grew 3.7% to $1.2 billion from $1.1 billion in the prior year quarter mainly due to growth in Education and Information & Media segments, offset to a certain extent by a decline in its Financial Services segment.
A low-single-digit growth in the top line coupled with strict control over expenses enabled McGraw-Hill to register an impressive 53.0% growth in operating profit to $190.3 million.
The Education segment recorded a growth of 1.5% in revenue to $317.2 million, reflecting revenue growth at McGraw-Hill Higher Education, Professional and International Group (up 8.3%), partially offset by declines at McGraw-Hill School Education Group (down 9.0%).
Financial Services revenue witnessed a growth of 9.3% to $667.0 million, primarily driven by a revenue expansion of 15.4% at S&P’s Credit Market Services, partially offset by a 1.5% decrease at S&P’s Investment Services. The growth at S&P’s Credit Market Services stemmed from a 33.6% increase in transaction revenue, helped by a rise in bond issuances and bank loan rating activity.
Information & Media segment revenue declined 8.5% to $206.2 million mainly due to lower revenues at Business-to-Business Group (down 9.5%), partially offset by a modest increase at Broadcasting Group (up 2.2%). Divestiture of the BusinessWeek magazine (part of its Business-to-Business Group) to Bloomberg was chiefly responsible for lower revenues. McGraw-Hill sold the magazine, which had long been grappling with a slump in advertising demand amid the global downturn, in December 2009 as advertisers migrated to the Internet due to increasing online readership and lower ad prices than print.
Moving forward, McGraw-Hill continues to expect earnings of $2.55 to $2.65 per share for 2010. The guidance remains in line with the Zacks Consensus Estimate of $2.63 per share, derived from 8 covering analysts, which has remained constant over the past 2 months.