U.S. Markets closed

Neutral on McGraw Hill Financial

Zacks Equity Research

We have maintained our long-term Neutral recommendation on McGraw Hill Financial, Inc. (MHFI) with a target price of $67.00.

Why the Reiteration?

McGraw Hill Financial is restructuring its portfolio of businesses to concentrate more on high-growth operations, thereby enhancing shareholder value through proper capital allocation.

The company reclassified its Education segment as discontinued operations, which was divested to Apollo Global Management LLC (APO) for $2.4 billion in cash. McGraw Hill Financial also seeks to increase its ownership in CRISIL to 75% from the existing 53%. Moreover, it completed the sale of Aviation Week to Penton.

Moreover, McGraw Hill Financial has made several strategic investments in its core businesses to drive growth. 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 other industry majors like privately held Fitch, Moody’s Corp. (MCO) and Dun & Bradstreet (DNB).

These moves are paying off well as evident from the robust second-quarter 2013 results where top and bottom line registered double-digit growth on account of strong performance of the S&P Ratings and S&P Dow Jones Indices business.

Strong results enabled the company to raise its 2013 earnings guidance range. The company now expects earnings in the range of $3.15 – $3.25 per share compared with its earlier guidance range of $3.10 – $3.20.

Despite the positives, DOJ’s civil lawsuit filed against McGraw Hill Financial brings in significant challenges, and compels us to be on the sidelines. However, in the near-term, the stock carries a favorable Zacks Rank #2 (Buy). 

Read the Full Research Report on DNB

Read the Full Research Report on MCO

Read the Full Research Report on APO

Read the Full Research Report on MHFI

Zacks Investment Research

More From Zacks.com