McGraw-Hill Posts Robust Q4 Earnings - Analyst Blog

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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

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



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: DNB , FDS , MCO , MHFI

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