Earnings Preview: McGraw-Hill Companies

McGraw-Hill Companies (MHP) is expected to report Q2 earnings before market open Tuesday, July 29, with a conference call scheduled for 8:30 a.m. ET.

Guidance

Analysts are looking for a profit of 65c on revenue of $1.65B. The consensus range is 58c to 69c for EPS, and revenue of $1.56 to $1.68, according to First Call. In June, the company forecast FY08 EPS $2.65 to $2.75 vs. First Call consensus of $2.80 and FY08 revenue up 6% to 8%; the guidance was unchanged from previous guidance and does not include the impact of the May restructuring charge. At the same time, CEO Harold McGraw said he is cautious about the sustainability of this environment.

Analyst Views

A Zacks analyst said that the outlook for the company's financial services segment is "murky," as the mortgage-backed securities and collateralized debt obligation markets have dried up. This segment contributes 45% of total company revenue. The analyst said that the unit's services operating income is shrinking at mid-20's rate and does not feel "it will trough" until at least the Q4, and then "it may likely remain weak through 2009." The weakness could be partially offset by mid-to-high single-digit growth in both the education segment and information and media segment, the analyst said.

McGraw-Hill (MHP), along with private equity firms Bain and TPG, are said to be interested in buying Reed Elsevier's (RUK) $1.25B trade magazine division, the Telegraph recently reported.