The improved performance at S&P’s Credit Market Services and growth in higher education, professional and international markets, helped McGraw-Hill (MHP) post better-than- expected first-quarter 2010 results. Some signs of recovery were also noticed in the elementary-high school market, buoyed by the federal stimulus. The company also sold BusinessWeek, the magazine that had long been grappling with plunging advertising demand. Advertising revenues, an important source of revenue for the Information & Media segment, are driven by the health of the economy.
 
McGraw-Hill’s results could be negatively impacted by lower volume of debt securities issued in the capital markets. Financial distress of the recent kind could either dent investors’ demand for debt securities or increase the reluctance among issuers to issue such securities. In addition, increase in interest rates or credit spreads, may also adversely affect the general level of debt issuance.
 
We have a Neutral rating on McGraw-Hill. However, we hold a Zacks #4 Rank, which translates into a short-term ‘Sell’ recommendation.
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