McGraw-Hill Posts Robust Q4 Earnings - Analyst Blog

Shutterstock photo

McGraw Hill Financial, Inc . ( MHFI ) posted fourth-quarter 2013 adjusted earnings per share of 81 cents, which rose 12% from the year-ago quarter figure and beat the Zacks Consensus Estimate by a couple of cents.

For 2013, adjusted earnings came in at $3.33, up 21% year over year and surpassing the Zacks Consensus Estimate of $3.31.

Including non-recurring items, McGraw Hill Financial posted earnings per share of 62 cents, down 6% year over year. For full year, earnings came in at $2.90 per share, up 22% year over year.

Total revenue of this Zacks Rank #2 (Buy) stock increased 2% year over year to $1,250 million, reflecting strong performance across all business segments except Standard & Poor's Ratings Services. Moreover, the reported revenues surpassed the Zacks Consensus Estimate of $1,241 million.

For 2013, revenues came in at $4,875 million, up 10% year over year and above the Zacks Consensus Estimate of $4,864 million.

McGraw Hill Financial gave 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 $3.77 per share for 2014. Further, the company expects revenue growth in mid single-digits. In 2014, the company is likely to generate free cash flow worth $1 billion.

Segment Details

Standard & Poor's Ratings Services segment revenues decreased 2% to $574 million, whereas adjusted operating profit fell 9% to $231 million.

Transaction revenues, which include ratings of publicly issued debt and bank loan as well as corporate credit estimates, fell12% to $257 million. However, non-transaction revenues, which include annual contracts, surveillance fees and subscriptions, rose 8%. International revenues increased 8% to $287 million.

S&P Capital IQ segment revenues grew 4% to $301 million. Excluding ongoing portfolio restructuring, organic revenues grew 5%. S&P Capital IQ's international revenues increased 8% to $107 million. Moreover, the segment's adjusted operating income rose 1% to $54 million.

S&P Dow Jones Indices revenues rose 18% to $130 million in the said quarter, driven by growth in assets under management (AUM) in exchange-traded funds. The segment's adjusted operating income fell 26% to $37 million.

The company noted that AUM in exchange-traded funds rose 43% to $668 billion on the S&P Dow Jones indices.

Commodities & Commercial Markets segment revenues increased 2% to $264 million, reflecting strong performance at Platts, which witnessed a 10% revenue increase to $141 million. Revenues at Commercial Markets fell 6%.  J.D. Power registered second successive quarter of revenue growth partly offset by the poor performance of Construction. Adjusted segment operating income increased 41% to $84 million.

Financial Aspects

McGraw-Hill Financial ended the quarter with cash and short-term investments of $1,560 million and long-term debt of $799 million. For full year, the company incurred capital expenditures of $117 million and generated free cash flow of $624 million.

During 2013, McGraw-Hill Financial bought back shares worth $1 billion and paid dividends worth $300 million. In Dec 2013, after completion of existing share buyback authorization, the board of directors announced a new 50 million share repurchase program.

On Jan 29, 2014, the company announced a 7.1% hike in its quarterly dividend to 30 cents. The increased dividend will be paid on Mar 12, 2014, to stockholders of record as of Feb 26.
Our Take

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 shareholder value through proper capital allocation.

Despite these measures, rising competition from peers such as Fitch, FactSet Research Systems Inc . ( FDS ), Moody's Corp. ( MCO ) and Dun & Bradstreet ( DNB ) remains a concern.

DUN &BRADST-NEW (DNB): Free Stock Analysis Report

FACTSET RESH (FDS): Free Stock Analysis Report

MOODYS CORP (MCO): Free Stock Analysis Report

MCGRAW HILL FIN (MHFI): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: DNB , FDS , MCO , MHFI

More from


Equity Research
Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by