McGraw Hill Q3 Profit Slides on Slow Ratings Business and Slump in Textbook Sales

October 21 00:00 2011

New York, October 21 ( – McGraw Hill (NYSE: MHP) reported a decline in profits for Q3, missing analyst estimates mainly due to its Standard & Poor’s rating business facing a slump with turbulent credit markets, and drop in textbook sales.

The company said Thursday that the demand for ratings dropped as corporate bond issuance was sluggish due to the European debt crisis. Moreover, its textbook sales have also dropped as local governments are reducing costs because of lower tax receipts. The company’s revenues fell 2.5 percent. However, stronger results in the company’s market information businesses, which include Standard & Poor’s stock indexes, Capital IQ corporate financial information, and Platts, which reports commodity prices cheered investors amid a lot of bad news.

Piper Jaffray, analyst Peter Appert., said “It was a mixed bag. The education business is terrible. The indexes and Capital IQ look great and Platts continues to perform exceptionally well.”

McGraw-Hill is also facing political pressure linked to its Standard & Poor’s rating unit. The US Securities and Exchange Commission has also targeted S&P for a possible civil lawsuit over its ratings of a collateralized debt obligation.

In the third quarter, net income from continuing operations declined to $366.7 million. On a per-share basis, the company earned $1.21, the same as its adjusted per-share earnings from last year’s third quarter last year, as the company bought back shares.