McGraw-Hill Takes New Shape - Analyst Blog
March 25 2013 - 6:20AM
Zacks
The McGraw-Hill Companies
Inc. (MHP) recently completed the earlier announced
divestiture of its education division to the Apollo Global
Management LLC (APO) for $2.4 billion cash.
The move is a strategic attempt on
McGraw-Hill’s behalf to restructure its portfolio of businesses and
concentrate more on high growth operations, thereby enhancing
shareholder value through proper capital allocation.
Alongside, the company’s education
division has been confronting shrinking revenues due to reduced
spending on textbooks by the government. Further, McGraw-Hill was
facing execution risk associated with its plans to develop its
education division into a subscription-based model through digital
delivery.
McGraw-Hill will now be known as
McGraw Hill Financial, following approval from shareholders. The
company will primarily focus on capital and commodities markets and
include iconic brands like S&P Ratings, S&P Capital IQ,
S&P Dow Jones Indices and Platts.
To supplement its financial
division, McGraw-Hill has made several strategic investments in its
core businesses. The formation of S&P Dow Jones Indices coupled
with S&P Capital IQ’s acquisitions of Credit Market Analysis
Limited, QuantHouse, R2 Financial Technologies and TheMarkets.com
position it well against its competitors, Thomson Reuters
Corporation (TRI), FactSet Research Systems
Inc. (FDS) and Bloomberg to grab a wider market through
superior functionality and investor oriented services and in turn
help boost the top- and bottom-line results of the company.
Moving ahead, the company expects
to utilize the proceeds from sales (approximately $1.9 billion net
of tax) to buyback shares, reduce short-term debt obligations and
make strategic acquisitions.
Moreover, McGraw-Hill expects
revenues to increase in the high single-digit, while adjusted
earnings are forecasted to be in the range of $3.10 to $3.20 per
share for 2013, up 15% year over year.
Currently, shares of McGraw-Hill
hold a Zacks Rank #4 (Sell) as the $5 billion civil fraud case
against S&P ratings by the U.S. Department of Justice remains a
drag on the stock.
APOLLO GLOBAL-A (APO): Free Stock Analysis Report
FACTSET RESH (FDS): Free Stock Analysis Report
MCGRAW-HILL COS (MHP): Free Stock Analysis Report
THOMSON REUTERS (TRI): Free Stock Analysis Report
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