Earnings Preview: McGraw-Hill - Analyst Blog
31 Oktober 2012 - 11:20AM
Zacks
The McGraw-Hill Companies
Inc. (MHP) – a publisher and a provider of financial
information and media services – is slated to release its financial
results for the third quarter of fiscal 2012 on Friday, November 2,
2012.
Earlier, the results were scheduled to release on October 31, 2012;
however, it has been postponed to Friday, November 2, 2012, owing
to bad weather conditions arising from Hurricane Sandy.
The current Zacks Consensus Estimate for earnings is $1.30 per
share, ranging between a low of $1.28 and a high of $1.35 per
share. The current estimate reflects a 7.4% increase from $1.21 per
share reported in the prior-year period. Revenue, as per Zacks
Consensus Estimate for the quarter, is valued at $1,989
million.
We believe the company’s focus on
growth and value plan along with the acquisition made by the
company recently have aided the earnings estimate to move up, which
is expected to continue in the upcoming quarters.
In the last reported quarter, McGraw-Hill acquired Credit Market
Analysis Limited (CMA) from CME Group Inc. (CME),
which is an independent data provider in the over-the-counter
markets. The acquisition strengthens S&P Capital IQ’s position
in the market compared to its peers.
Synopsis of the Last Quarter
McGraw-Hill’s second-quarter 2012 adjusted earnings increased 25%
to 85 cents a share and also surpassed the Zacks Consensus Estimate
of 76 cents. However, including one-time items, earnings increased
11% year over year.
The company stated that the strong
performance of S&P Indices/ S&P Capital IQ and Commodities
& Commercial boosted the quarterly profits.
McGraw-Hill’s total revenue inched
down 1% year over year to $1,547 million and came below the Zacks
Consensus Estimate of $1,587 million.
(For full report on earnings study: McGraw-Hill Beats on Bottom
Line)
Agreement of Estimate Revisions
For the to-be-reported quarter, 2 out of 6 analysts raised their
earnings estimates while none lowered the same over the past 30
days. During the last 7 days none of the analysts changed their
estimates.
Moreover, for fiscal 2012, a similar trend was noticed over the
last 7 as well as 30 days, with 2 out of 8 analysts revising their
estimates up and none lowering the same over the same time
frame.
Magnitude of estimate Revisions
For the upcoming quarter, the Zacks Consensus Estimate moved up by
a penny to $1.30 per share over the last 30 days, whereas in the
past 7 days it remained unchanged.
For fiscal 2012, the Zacks Consensus Estimate increased by 5 cents
to $3.40 per share in the last 30 days, whereas no changes were
seen over the last 7 days.
Mixed Earnings Surprise History
With respect to earnings surprise, McGraw-Hill has beaten the Zacks
Consensus Estimate in three out of the last four quarters, whereas
it missed the estimate in one quarter. The company has topped the
Zacks Consensus Estimate by an average of 6.2% in the trailing four
quarters.
Neutral on McGraw-Hill
With an aim to boost the shareholders’ value, McGraw-Hill announced
extensive growth and value measures, including the separation of
the company into two independent companies, McGraw-Hill Financial
and McGraw-Hill Education. McGraw-Hill expects to complete the
split-up by the end of fiscal 2012.
Further, the company added that it will focus on abridging costs by
$100 million to ensure that higher costs would not be an impediment
in margin expansion at both Financial and Education.
However, the company’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 investor’s
demand for debt securities or make issuers reluctant to issue such
securities. In addition, increase in interest rates or credit
spreads, may adversely affect the general level of debt
issuance.
Due to the factors mentioned above, we currently maintain our long
term ‘Neutral’ recommendation on the stock. McGraw-Hill, which
competes with Pearson plc (PSO), holds a Zacks #2
Rank, translating it into short-term Buy rating on the stock based
on positive earnings surprise in the last three successive
quarters.
CME GROUP INC (CME): Free Stock Analysis Report
MCGRAW-HILL COS (MHP): Free Stock Analysis Report
PEARSON PLC-ADR (PSO): Free Stock Analysis Report
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