McGraw Hill Financial, Inc.
) posted first-quarter 2014 earnings per share of 89 cents, which
beat the Zacks Consensus Estimate by a couple of cents. The
reported figure also rose 12% year over year.
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Total revenue of this Zacks Rank #3 (Hold) stock increased 5%
year over year to $1,236 million owing to strong performance of
the Platts business and S&P Dow Jones Indices. However,
revenues fell short the Zacks Consensus Estimate of $1,237
McGraw Hill Financial reiterated its 2014 earnings guidance. The
company expects adjusted earnings in the range of $3.75-$3.85 per
share. The current Zacks Consensus Estimate stands at $3.80 per
share for 2014.
Standard & Poor's Ratings Services
segment revenues increased 1% to $569 million while its operating
profit fell 4% to $240 million.
Transaction revenues, which include ratings of publicly issued
debt and bank loan as well as corporate credit estimates, fell 7%
to $245 million. However, non-transaction revenues, which include
annual contracts, surveillance fees and subscriptions, rose 9%.
International revenues increased 6% to $264 million.
S&P Capital IQ
segment revenues grew 4% to $301 million. Excluding ongoing
portfolio restructuring, organic revenues rose 6%. S&P
Capital IQ's international revenues increased 4% to $102 million.
Moreover, the segment's operating income rose 6% to $53 million.
S&P Dow Jones Indices
revenues rose 18% to $137 million in the said quarter, driven by
growth in assets under management (AUM) in exchange-traded funds.
The segment's operating income increased 43% to $91 million.
The company noted that AUM in exchange-traded funds based on the
S&P Dow Jones indices rose 27% to $667 billion.
Commodities & Commercial Markets
segment revenues increased 6% to $251 million, reflecting strong
performance at Platts, which witnessed a 14% revenue increase to
$148 million. Revenues at Commercial Markets fell 3%. J.D. Power
registered double-digit revenue growth on the back of its strong
auto business in China and customer advertising. The segment
operating income increased 27% to $76 million.
McGraw-Hill Financial ended the quarter with cash and short-term
investments of $1,531 million and long-term debt of $799 million.
For the quarter, the company incurred capital expenditures of $20
million and generated free cash flow of $85 million.
During the first quarter, McGraw-Hill Financial bought back 2.2
million shares and has 47.8 million shares left to be repurchased
under the current share buyback authorization.
McGraw-Hill Financial remains well positioned in major market
sectors and will likely benefit from its strategic investments in
businesses to generate long-term profitability. The company is
restructuring its portfolio of businesses to concentrate more on
high-growth operations, thereby enhancing shareholders' value
through proper capital allocation.
Despite these measures, rising competition from peers such as
FactSet Research Systems Inc.
Dun & Bradstreet
) remains a concern.