McGraw-Hill Slips Despite Beat - TheStreet

McGraw-Hill Slips Despite Beat

Worries about the credit markets hit the S&P owner.
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Shares of



slid 4% Tuesday as concerns about slowing growth and the shaky credit markets overshadowed a second-quarter earnings beat.

The publishing conglomerate posted second-quarter income of $277.1 million, or 79 cents a share, up 25% from $221 million, or 60 cents a share, a year earlier. Analysts polled by Thomson Financial projected earnings of 73 cents a share.

Revenue rose to $1.72 billion from $1.53 billion, compared with Wall Street's estimate of $1.67 billion.

The company, which owns

Business Week

, J.D. Power and Associates and Standard & Poor's, said a strong performance in its financial services division was a key factor in the quarter.

The division, which includes ratings agency S&P, saw revenue rise 21% to $821 million. McGraw-Hill said strength in fixed income and equity information services helped boost results.

In particular, McGraw-Hill said structured finance -- including "robust" activity in commercial mortgage-backed securities and collateralized debt obligations -- was strong for S&P.

The CDO market has been rocked recently, however, amid concerns about defaults on subprime mortgages. Shares of McGraw-Hill have fallen nearly 10% since the beginning of June as investors worry about demand for S&P's services.

The broader market was lower Tuesday as a profit miss and bleak forecast from

Countrywide Financial


added to fears about the health of mortgage lending. Shares of McGraw-Hill were slipping $2.84, or 4.5%, to $60.53 in recent trading.

McGraw-Hill said it anticipates double-digit earnings growth in 2007, though it expects growth to slow during the second half. In particular, tougher comparisons in the fourth quarter at its financial services division will make the period more challenging, the company said.