The McGraw-Hill Companies Inc
), which will be rechristened as McGraw Hill Financial and
commence trading under a new symbol "MHFI" on May 14, posted
better-than-expected first-quarter 2013 earnings of 80 cents a
share that outpaced the Zacks Consensus Estimate of 72 cents, and
jumped 29% year over year. However, management reiterated its
2013 earnings guidance of $3.10 to $3.20 per share.
The company reclassified its Education segment as discontinued
operations, which was divested to
Apollo Global Management LLC
) for $2.4 billion in cash.
Total revenue of this Zacks Rank #2 (Buy) stock escalated 14%
year-over-year to $1,181 million, but fell short of the Zacks
Consensus Estimate of $1,185 million.
Standard & Poor's Ratings
segment revenue augmented 20% to $561 million attributable to
strength witnessed across corporate issuance and sustained
recovery experienced in the U.S. structured finance issuance.
Operating income increased 39% to $259 million.
Transaction revenue, which include ratings of publicly issued
debt and bank loan, and corporate credit estimates, surged 36% to
$264 million. On the other hand, non-transaction revenue, which
includes annual contracts, surveillance fees and subscriptions,
elevated 9% to $297 million.
S&P Capital IQ
segment revenue grew 5% to $288 million, driven by an increase of
5% in subscription revenue to $260 million. Non-subscription
revenue also jumped 5% to $28 million. S&P Capital IQ's
international revenue climbed 12% to $98 million. Segment's
operating income fell 9% to $56 million.
The company acquired Credit Market Analysis Limited (CMA) from
CME Group Inc.
). London-based Credit Market Analysis Limited is an independent
data provider in the over-the-counter markets. The acquisition
strengthens S&P Capital IQ's position in the market, where it
competes with Reuters, FactSet and Bloomberg.
With the growing need of investors to access readily available
data, fierce competition has emerged among the companies offering
financial information solutions to grab a wider market through
superior functionality and investor oriented services.
To grab its share of the market, the company took a similar
stance in the past and acquired QuantHouse, the provider of
market statistics and trading solutions along with R2 Financial
Technologies that offers risk and scenario-based analytics across
different asset classes to investors, risk and portfolio managers
for pricing, hedging and capital maintenance.
These moves enable McGraw-Hill to offer investors access to
global exchange pricing, securities valuations and asset
analytics, while facilitating S&P Capital IQ to create
real-time platforms, data base and analytics.
Further, the acquisition of TheMarkets.com by Capital IQ
strengthened its position in the highly competitive financial
data provider sector. The acquisition facilitates Capital IQ to
provide a comprehensive research package to its buy-side clients,
which not only include fundamental and quantitative research as
well as analysis solutions but cover equity and market research
reports and earnings estimates with valuation models from leading
brokers. The number of S&P Capital IQ Desktop Solutions users
rose 10% year-over-year.
S&P Dow Jones Indices
revenue soared 45% to $115 million during the first quarter.
However, excluding the revenue related to the Dow
Jones Indexes, revenue marked an increase of 9% to $86
million. Segment's operating income surged 47% to $67
The company noted that assets under management in
exchange-traded funds surged 26% to $450 billion on S&P's
indices. Moreover, assets under management came in at $525
billion, including the Dow Jones Indexes.
The company along with CME Group announced the commencement of
their index business with the launch of S&P-Dow Jones
CME Group owned 90% of the joint venture (JV) between CME
) Dow Jones, which also owns Dow Jones Indexes, before the JV
between CME Group and McGraw-Hill was established in November
last year. The JV aims to tap the rapidly growing index
The transaction is expected to be accretive to McGraw-Hill's
earnings and S&P-Dow Jones Indices is expected to drive
profit growth through enhanced revenue, asset-class expansion,
cost synergies, highly efficient infrastructure and reduced
capital requirements, while generating free cash flow.
Commodities & Commercial Markets
segment revenue inched up 1% to $236 million, as the strong
performance at Platts was offset by sluggish revenue result at
Commercial market due to lower advertising at J.D. Power and
Associates. Aviation Week also faced tough comparison. Segment
operating income tumbled 2% to $62 million.
Commodities marked growth of 10% to $130 million during the
period. However, revenue fell 8% at Commercial Markets.
McGraw-Hill ended the quarter with cash and cash equivalents
of $1,905 million, long-term debt of $799 million and
shareholders' equity of $1,082 million. The company incurred
capital expenditures of $22 million and generated negative free
cash flow of $86 million.
Concurrent to the sale of its education division, McGraw-Hill
on Mar 25 announced an accelerated share repurchase program of
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