We have maintained our long-term Neutral recommendation on
McGraw Hill Financial, Inc
) with a target price of $67.00.
Why the Reiteration?
McGraw Hill Financial is restructuring its portfolio of
businesses to concentrate more on high-growth operations, thereby
enhancing shareholder value through proper capital
The company reclassified its Education segment as discontinued
operations, which was divested to
Apollo Global Management LLC
) for $2.4 billion in cash. McGraw Hill Financial also seeks to
increase its ownership in CRISIL to 75% from the existing 53%.
Moreover, it completed the sale of Aviation Week to Penton.
Moreover, McGraw Hill Financial has made several strategic
investments in its core businesses to drive growth. The formation
of S&P Dow Jones Indices coupled with S&P Capital IQ's
acquisitions of Credit Market Analysis Limited, QuantHouse, R2
Financial Technologies and TheMarkets.com position it well
against other industry majors like privately held Fitch,
Dun & Bradstreet
These moves are paying off well as evident from the robust
second-quarter 2013 results where top and bottom line registered
double-digit growth on account of strong performance of the
S&P Ratings and S&P Dow Jones Indices business.
Strong results enabled the company to raise its 2013 earnings
guidance range. The company now expects earnings in the range of
$3.15 - $3.25 per share compared with its earlier guidance range
of $3.10 - $3.20.
Despite the positives, DOJ's civil lawsuit filed against
McGraw Hill Financial brings in significant challenges, and
compels us to be on the sidelines. However, in the near-term, the
stock carries a favorable Zacks Rank #2 (Buy).
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