Can McGraw Hill Financial Inc (MHFI) Deliver another Positive Earnings Surprise?


McGraw Hill Financial Inc (NYSE:MHFI) will announce its financial numbers on Monday before the market opens. The company was consistent in delivering positive earnings surprise at least in the last four quarters. Therefore, the expectations will naturally be that the company would follow its trend.

However, expectations of McGraw Hill Financial Inc (NYSE:MHFI)’s earnings have fallen during the last three-month period. This was probably more to do with the industry pattern as the financial sector struggled to meet analysts’ expectations. The company seems to be focusing itself on its main business for growth.

Growth Drivers

The company’s rating services continue to be the growth drivers with nearly half of the revenue coming from it. For instance, of the total revenue of $1.26 billion in the third quarter, $604 million came from S&P rating services and recorded 12% uptick.

Similarly, McGraw Hill Financial Inc (NYSE:MHFI)’s revenue from S&P Capital IQ was another big contributor to the overall revenue. Its growth was 6% only during the third quarter. In the same way, S&P Dow Jones Indices produced revenue of $143 million in the third quarter representing 15% growth. Its Commodities & Commercial markets witnessed only 7% growth due to weak sentiments in the segment.

In a nutshell, the company is expecting to benefit from the improved equity markets amidst economic improvement. It also appeared that structured finance issuance witnessed a momentum in the December quarter though slowly warranting a rating. Its commodities and commercial markets might have witnessed a slow down due to muted market sentiments.

Earnings Expectations

In the fourth quarter of 2013, the company reported earnings of 81 cents a share on revenues of $1.25 billion. Currently, Wall Street analysts’ are predicting McGraw Hill Financial Inc (NYSE:MHFI) earnings growth of 11.1% on revenue uptick of 2.5%. This means that the company would have to report earnings of 90 cents a share and revenue of $1.28 billion for the December quarter.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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