The McGraw-Hill Cos. (MHP) Tuesday reported a surge in first-quarter profit, mostly on gains from the sale of its education business. Revenues were up fourteen percent, mainly on growth at Standard & Poor's ratings business, but was offset by lower margins at most other segments.
The company reaffirmed its adjusted earnings guidance for fiscal year 2013.
McGraw-Hill, which provides information services for financial and commodity markets, reported quarterly net income of $735 million or $2.59 per share. This compares with $123 million or $0.43 per share reported last year.
Results for the quarter included a gain of $612 million in discontinued operations. Also included in results are settlement charges of $77 million as its S&P unit settled a suit with plaintiffs, led by Abu Dhabi Commercial Bank and King County, Washington, over an investment ratings issue.
Excluding items, earnings from continuing operations for the quarter were $153 million or $0.54 per share, compared to $158 million or $0.56 per share last year.
On average, six analysts polled by Thomson Reuters expected earnings of $0.73 per share for the quarter. Analysts' estimates typically exclude special items.
Revenues for the quarter were higher at $1.18 billion, compared to $1.04 billion a year ago.
Analysts on consensus estimated revenues of $1.17 billion.
Revenue at its S&P ratings unit rose 20 percent from a year ago to $561 million, on strength in corporate issuance, and continued recovery in U.S. structured finance issuance. Operating income was up 39 percent.
S&P Capital IQ revenue increased 5 percent to $288 million, while operating income dropped 9 percent.
Revenue at S&P Dow Jones Indices jumped 45 percent to $115 million, with robust growth in margins. Revenue from commercial and commodities markets edged up 1 percent to $236 million, but operating income slid 2 percent.
Expenses for the quarter increased 20 percent to $903 million, from a year ago.
For fiscal year 2013, McGraw-Hill continues to expect adjusted earnings of $3.10 to $3.20 per share, while analysts currently expect $3.19 per share.
The company plans to change its name to McGraw Hill Financial pending a shareholder vote on May 1, and will trade under a new ticker symbol "MFHI" from May 14.
In February, the U.S. Department of Justice filed a civil lawsuit against S& P's Ratings Services for having misrepresented ratings of structured securities and caused losses to investors, mostly federally insured financial institutions. The government has identified more than $5 billion in losses. McGraw-Hill has denied the charges and has asked for dismissal of the complaint.
In March, McGraw-Hill closed the $2.4 billion sale of its McGraw-Hill Education business to investment funds affiliated with Apollo Global Management LLC (APO).
McGraw-Hill stock is trading at $54.60, up 2.15%, on a volume of 1.8 million shares on the NYSE.
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