McGraw-Hill Earnings Up on Education, S&P

McGraw-Hill sees earnings rise during the third quarter, driven by strong gains in its education segment as well as solid gains at Standard & Poor Indices.
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NEW YORK (

TheStreet

) --

McGraw-Hill

(MHP)

saw earnings rise during the third quarter, driven by strong gains in its education segment as well as solid gains at Standard & Poor Indices.

For the quarter ended Sept. 30, the company saw earnings rise 13% to $379.9 million, or $1.23 per diluted share, compared with earnings of $336.1 million, or $1.07 per diluted share, in the same period a year ago. Earnings from continuing operations were $1.22 a share, ahead of analyst estimates of $1.10 a share.

Revenue was up 5.5% to $1.98 billion from $1.88 billion during the quarter.

"There were a host of contributors to our strong third quarter performance," company chairman, president and CEO Harold McGraw III said. "They include surging global high-yield issuance in the bond market, a solid gain at S&P Indices, increases in U.S. elementary-high school and higher education in the seasonally most important quarter of the year, double-digit increases in the sales of digital products and services in higher education and professional markets, and global growth in energy information products."

The increase in the company's total revenue was driven by large gains in its education division, which is its largest segment. Education revenue was up 5.5% to $1.05 billion from $1 billion a year ago, due to effective cost management and a strong performance in the state new adoption market. Substantial orders from adoption states with the biggest student enrollment, such as Texas, California and Florida, contributed to the increase.

Management expects that the elementary and high school market to grow 4% to 6% in 2010, while the U.S. higher education market is expected to grow 8% to 10%.

Financial services revenue grew by 9.5% to $697.4 million from $637 million, driven by staff increases overseas and the acquisition of TheMarkets.com.

"Surging new issuance in the global high-yield bond market and a robust syndicated leveraged bank loan market contributed to an 11.1% increase in revenue for Standard & Poor's Credit Market Services in the third quarter."

S&P Credit Market Services produced $473.2 million in revenue, while revenue for Standard & Poor's Investment Services grew by 6.3% to $224.2 million.

Revenue from its information and media segment fell 4.7% to 227.8 million from 238.9 million, attributed to the divestiture of

Business Week

.

For the first half of the year, earnings rose 19.7% to $674.2 million, or $2.15 per share, compared with earnings of $563.2 million, or $1.80 a share, in the same period a year ago.

Revenue rose fell 3.5% to $4.64 billion from $4.49 billion. Education division revenue was up 3.7% to $1.94 billion from $1.87 billion. Financial services revenue was up 6.7% to $2.05 billion from $1.92 billion, and global corporate high-yield issuance of $248.8 billion surpassed the previous full year record of $243.5 billion, which was set in 2007.

"In view of our strong performance for the first nine months of 2010, we are increasing guidance for the year," McGraw said. "We now anticipate earnings per share in the $2.60 to $2.65 range and expect to achieve the high end of that range. The new guidance excludes $0.02 of one-time gains from divestitures, but includes dilution of $0.02 from acquisitions."

--Written by Theresa McCabe in Boston.

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