Earnings Preview: McGraw-Hill - Analyst Blog
19 Oktober 2011 - 2:15PM
Zacks
The McGraw-Hill Companies
Inc (MHP) is slated to report its third-quarter 2011
financial results on Thursday, October 20, 2011. The current Zacks
Consensus Estimate for the quarter is $1.23 a share. For the
quarter to be reported, the Zacks Consensus Estimate for revenue is
$2,041 million.
Second-Quarter 2011, a
Synopsis
McGraw-Hill’s quarterly earnings of
68 cents per share came a penny ahead of the Zacks Consensus
Estimate, and rose 11.9% from 61 cents earned in the prior-year
quarter.
McGraw-Hill’s total revenue of
$1580.8 million handily beats the Zacks Consensus Estimate of
$1,551 million, and jumped 7.2% from the prior-year quarter.
The company registered healthy
performance across McGraw-Hill Financial, Standard & Poor's and
Information & Media, partially offset by a decline in
McGraw-Hill Education resulting from delay in orders. Management
believes that in third-quarter 2011, the elementary and high school
market would gain from delayed orders in the second quarter,
particularly from Texas.
Third-Quarter 2011
Zacks Consensus
The analysts covered by Zacks,
expect McGraw-Hill to post third-quarter 2011 earnings of $1.23 a
share. The current Zacks Consensus Estimate reflects a growth of
0.8% from the prior-year quarter’s earnings. The current Zacks
Consensus Estimate for the quarter ranges between $1.20 and $1.27 a
share.
Zacks Agreement &
Magnitude
The current Zacks Consensus
Estimate came down by a penny over the last 7 days with 2 out of 7
analysts covering the stock, revising their estimate downwards.
With respect to earnings surprises,
McGraw-Hill has topped the Zacks Consensus Estimate over the last
four quarters in the range of 1.5% to 11.9%. The average remained
at 6.2%. This suggests that McGraw-Hill has outperformed the Zacks
Consensus Estimate by an average of 6.2% in the last four
quarters.
What Drives Estimate
Revision
McGraw-Hill has lost a substantial
market value in last 5 years and its rating agency was under fire
for its latest U.S. downgrade.
Further, advertising remains an
important source of revenue for the Information & Media segment
of the company and the slump in advertising revenue rings the alarm
about troubled times ahead in the economy, and its susceptibility
to such conditions.
However, McGraw-Hill, with the
intent of boosting shareholders’ value announced extensive growth
and value measures, including the separation of the company into
two independent companies, McGraw-Hill Markets and McGraw-Hill
Education.
Going with its plan, the company
aims to create two "focused companies” with optimal-size capital
and cost arrangement for amplifying client commitment and improving
strategic and economic suppleness while increasing management’s
focus and responsibility.
Further, the company added that it
will focus on abridging costs drastically to ensure competent
operating channels and will also accelerate the pace of share
buybacks to a total of $1 billion for the fiscal year 2011.
McGraw-Hill expects to complete the
transaction by the end of 2012 through a tax-free spin-off while
the separation plan is subject to the approval by the board of
directors.
Currently, we have a long-term
Neutral rating on McGraw-Hill, which competes with Pearson
plc (PSO). Moreover, the company holds a Zacks #3 Rank,
which translates into a short-term Hold recommendation.
MCGRAW-HILL COS (MHP): Free Stock Analysis Report
PEARSON PLC-ADR (PSO): Free Stock Analysis Report
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