McGraw-Hill (MHP) reported on Thursday a weaker-than-expected third-quarter profit as degrading credit markets dug in to its Standard & Poor’s rating business and sales of textbooks declined during the key back-to-school period.

The New York-based provider of products for the education, financial and media markets posted net income from continuing operations of $366.7 million, or $1.21 a share, down 2.1% from the same period last year. The results missed Wall Street’s view of $1.23.

Revenue was off 2.5% to $1.9 billion, falling widely short of average analyst estimates polled by Thomson Reuters of $2.04 billion, particularly due to softer text book sales and a decline in global credit markets amid the debt crisis in Europe.

Standard & Poor’s transaction revenue dropped 19.5% to $131.2 million during the period due largely to the European sovereign debt crisis and slow economic recovery.

“Overall, the business performed well despite challenging market conditions in global credit markets and historically low funding levels in the U.S. elementary-high school market,” McGraw-Hill CEO Harold McGraw said in a statement.

The company’s newly launched financial segment saw sales surge 18.4% during the quarter to $348.5 million, with a profit up 31%. That gain was led by volatility in the market last period that caused volumes to soar for the major exchange-traded funds on S&P indices. The average daily volume of more than 4.8 million contracts is up 58.5% year-over-year.

“We are still on track for another year of growth in 2011, but we remain cautious over the balance of the year,” he said, noting that the company predicts fiscal earnings of $2.81 to $2.86 a share, below the Street’s view of $2.89.

The company said it is making “excellent progress” on the separation of McGraw-Hill into two separate, publicly-traded companies. The company noted it is focused on completing the deal “as quickly as possible in the coming year.”

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