On Feb 19, 2014 we issued an updated research report on
McGraw Hill Financial, Inc.
). Ever since McGraw Hill posted better-than-expected
fourth-quarter 2013 results and provided an upbeat guidance for
2014 (on Feb 4), the Zacks Consensus Estimate has been trending
upwards. Stellar performance across all segments except the
Standard & Poor's Ratings Services was the driving factor.
Further, since the earnings release, the stock has garnered a
return of nearly 4.7%.
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The company's top and bottom lines of $1,250 million and 81 cents
easily surpassed the Zacks Consensus Estimate while rising 2% and
12% respectively, year over year. Following the strong
performance, McGraw Hill now projects adjusted earnings in the
range of $3.75-$3.85 per share. Further, the company anticipates
revenue growth in mid single digits in 2014, and is likely to
generate free cash flow worth $1 billion.
Consequently, for 2014, the Zacks Consensus Estimate has moved to
$3.80 from $3.76 and for 2015, it has risen to $4.30 from $4.27,
over the last 30 days.
Further, McGraw Hill is an attractive pick for investors seeking
both growth and income, as the company announced a dividend hike
on Jan 29, 2014. Moreover, it raised its quarterly dividend by
7.1% to 30 cents per share (or $1.20 annually) from 28 cents (or
$1.12 annually). The new payout will be given on Mar 12, 2014 to
stockholders of record on Feb 26.
Also, McGraw-Hill, which competes with
Dun & Bradstreet Corp.
), now seems to be well positioned to focus on high margin
business after it offloaded the Education segment and Aviation
week. The company is now concentrating on more on core financial
areas that would help it emerge as a leader in rating provider,
benchmark provider, and analytics in the global capital and
Further, McGraw-Hill is likely to benefit from its strategic
investments such as formation of S&P Dow Jones Indices
coupled with the S&P Capital IQ's acquisitions of Credit
Market Analysis, QuantHouse, R2 Financial Technologies and
TheMarkets.com along with a significant stake (68%) in India's
leading rating agency CRISIL as it positions to grab a wider
Mc Graw Hill currently has a Zacks Rank #2 (Buy).
Key Picks from the Sector
Other stocks worth considering in the financial services sector
FactSet Research Systems Inc.
Verisk Analytics, Inc.
). Both carry a Zacks Rank #2.