McGraw-Hill 1Q Profit Grows on Financial Sales

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McGraw-Hill (NYSE:MHP) reported on Tuesday a stronger-than-expected first-quarter profit as growth in its Capital IQ business and indices helped offset further declines in its education group as it readies to split its two independent companies by the end of this year.

The New York-based media and financial conglomerate, known best for its Standard & Poor’s credit ratings and its textbooks, reported net income of $123 million, or 44 cents a share, compared with a year-earlier $120 million, or 39 cents.

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Excluding one-time costs related to its plan to split into two companies, McGraw-Hill earned 51 cents, ahead of average analyst estimates of 48 cents in a Thomson Reuters poll.

The company last year announced plans to break apart amid shareholder demand. One business will focus on its markets unit, which includes its ratings agency and market intelligence groups, while the other will concentrate on education.

Businesses that make up what will be McGraw-Hill Financial reported last quarter revenue of $1.03 billion and an operating profit of $357 million, an increase of 8% and 10%, respectively.  Its S&P Capital IQ and S&P Indices’ revenue climbed 9% to $353 million and profit growth of 11% to $107 million, led by the Capital IQ unit.

Total revenue for the three months ended March 31 was $1.33 billion, up 6% from $1.26 billion, narrowly beating the Street’s view of $1.32 billion.

"The results are particularly gratifying in light of all of the effort our employees are making to prepare for the separation of the Corporation by year-end into two highly focused industry leaders," McGraw-Hill CEO Harold McGraw III said in a statement.

The education unit continued to weigh down sales, with revenue falling 2% to $296 million during the quarter. That was mostly affected by a 10% drop to $95 million in its school education group as a decline in government funding continued to stifle demand.

The company anticipates continued strength across its financial business and said it is encouraged by recent growth trends in higher education that, combined with cost cutting efforts, could help offset government funding challenges.

McGraw-Hill backed its fiscal 2012 earnings guidance in the range of $3.25 to $3.35 a share. Analysts are looking for a full-year profit of $3.33.