The McGraw-Hill Companies, Inc. (MHP), a publisher and provider of financial information and media services, recently reported better-than-expected fourth-quarter 2009 results on the heels of improved performance at S&P’s Credit Market Services, and growth in higher education, professional and international markets. The quarter marks the first quarterly increase in both the top and bottom lines since the third-quarter 2007.
The quarterly earnings of 51 cents a share outdid the Zacks Consensus Estimate of 40 cents, and climbed 21.4% from 42 cents delivered in the prior-year quarter. On a reported basis, including one-time items, earnings came in at 53 cents, up 43.2% from 37 cents posted in the year-ago quarter.
Management gave fiscal year 2010 earnings guidance in the range of $2.55 to $2.65 per share. McGraw-Hill’s shares rose 55 cents or 1.7% to $33.95 in pre-market trading.
McGraw-Hill said that total revenue for the quarter jumped 3.3% year-on-year to $1,462.5 million due to growth registered across Education and Financial Services segments, offset to some extent by a fall in revenue in its Information & Media segment.
A low-single-digit growth in the top line and stringent cost controls helped McGraw-Hill to deliver a 21% rise in operating profit to $262.5 million, excluding one-time items.
The Education segment revenue grew 2.6% to $520 million, reflecting revenue increase at McGraw-Hill Higher Education, Professional and International Group (up 7.5%) but was offset by declines at McGraw-Hill School Education Group (down 7.6%).
After declining for eight straight months in fiscal year 2009, some signs of recovery were noticed in the elementary-high school market, which has been buoyed by the federal stimulus. On the other hand, the U.S. higher education market sustained its growth momentum with the surge in enrollment in colleges and universities as unemployed and employed workers sought higher qualifications in a sluggish job market.
Financial Services revenue rose 10.6% to $689.2 million, driven by a revenue increase of 19.4% at S&P’s Credit Market Services, partially offset by a 4.8% decline at S&P’s Investment Services. The growth at S&P’s Credit Market Services reflected a 62.5% jump in transaction revenue, helped by a rise in corporate debt issuance.
The Information & Media segment revenue fell 11.4% to $253.3 million driven by the revenue decline at Business-to-Business Group (down 9.5%) and Broadcasting Group (down 26.6%). The slump in the advertising market was the primary reason for the segment’s dismal performance.
McGraw-Hill sold its BusinessWeek magazine (part of its Business-to-Business Group) to Bloomberg in December 2009. The magazine had long been grappling with the slump in advertising demand amid the global meltdown, as advertisers migrated to the Internet due to increasing online readership and lower ad prices than print.
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