McGraw-Hill Q3 Profit Declines 14% As Revenues Drop; Boosts FY09 EPS Outlook

10/26/2009 9:22 AM ET

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(RTTNews) - Owner of credit rating agency Standard & Poor's and book publisher McGraw-Hill Cos., Inc. (MHP: News ) on Monday reported a 14% year-over-year decline in profit for the third quarter, hurt by a drop in revenues across all business segments. However, Standard & Poor's credit market services registered the first quarterly increase in revenue since the third quarter of 2007.

Earnings per share for the quarter declined, but topped analysts' expectations by two cents. The company also raised its fiscal 2009 earnings forecast to be at the top-end of the prior outlook, and forecasted a higher decline in full year revenues from last year.

McGraw-Hill Companies provides information services in sectors like financial services, education and business information markets. Its most famous brands include BusinessWeek, Standard & Poor's, McGraw-Hill Education, and J.D. Power and Associates.

However, McGraw-Hill agreed earlier this month to sell its world-renowned weekly business magazine, BusinessWeek to Bloomberg L.P., with the transaction expected to close during the fourth quarter of 2009. The divestiture of BusinessWeek will enable McGraw-Hill to continue focusing resources on building the size, scale and global presence of its leading brands across fast-growing worldwide markets in financial services, education and business information. In July, the company had started exploring strategic options for BusinessWeek, in the wake of a significant slump in advertising revenues in recent quarters.

Third Quarter Results

The New York-based company posted net income of $336.11 million or $1.07 per share for the third quarter, down about 13.5% from $390.17 million or $1.23 per share in the prior-year quarter. The results for the year-ago quarter included $0.05 per share of an after-tax restructuring charge.

On average, six analysts polled by Thomson Reuters expected the company to report earnings of $1.05 per share for the third quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter declined 8.4% to $1.88 billion from $2.05 billion reported in the same quarter last year, and missed four Wall Street analysts' consensus estimate of $1.94 billion.

Segmental Details

Revenues for McGraw-Hill education decreased 11.6% from the year-ago quarter to $1.0 billion, while segment operating profit declined 15.9% to $298.14 million from the prior-year quarter. McGraw-Hill school education group revenues decreased 19.6%, and revenues for the McGraw-Hill higher education, professional and international group edged down 1.8%. The company noted that it produced good growth in the U.S. college and university market, while the elementary-high school market declined.