Tags: McGraw Hill | Profit | S&P | Probes

McGraw Hill Profit Beats Estimates as S&P Ends Probes

Thursday, 12 Feb 2015 12:20 PM


McGraw Hill Financial Inc. reported profit that beat analysts’ estimates even after the owner of the world’s largest credit-grader agreed to pay the biggest penalty ever levied against a bond-rating company.

After adjusting for costs associated with $1.5 billion in government fines against Standard & Poor’s, net income rose 22 percent to $264 million in the fourth quarter, the New York- based company said in a statement. Earnings excluding certain items were 95 cents a share, exceeding the average estimate of 90 cents in a Bloomberg survey of 11 analysts.

S&P last week agreed to pay the fines, without admitting wrongdoing, to resolve government claims that it bent criteria to win business from Wall Street banks in the run-up to the financial crisis. The penalties led to a $1 billion net loss at McGraw Hill in the three months through December. The company boosted its quarterly dividend to 33 cents a share from 30 cents.

With legal issues mostly resolved, shareholders are focusing on McGraw Hill’s ratings business, which has reported five straight years of revenue gains. The division helped increase total revenue 7 percent in the fourth quarter to $1.3 billion.

McGraw Hill has gained 10.3 percent this year to $98.16, outpacing Moody’s Corp.’s 1.6 percent gain to $97.30.

Ratings Revenue

Revenue from rating bonds, which makes up about half of McGraw Hill’s business, rose 8 percent to $618 million in the quarter. Issuance of corporate bonds climbed to a record $4.1 trillion last year as companies took advantage of borrowing costs near record lows. McGraw Hill doesn’t separate ratings earnings by securities type.

Sales at S&P Capital IQ, the financial-data provider, increased 5 percent to $318 million in the quarter. At S&P Dow Jones Indices, which licenses benchmarks for investments including exchange-traded funds, sales rose 8 percent to $140 million, the company said in the statement.

In its settlement, McGraw Hill agreed to pay the Justice Department, 19 states and the District of Columbia $1.375 billion to resolve claims that its S&P unit awarded top ratings on subprime mortgage bonds at the center of the 2008 financial crisis. S&P reached a separate $125 million settlement with the California Public Employees Retirement System, or Calpers, to resolve claims over three structured-investment vehicles.

Moody’s, McGraw Hill’s biggest competitor, reported earnings last week that also beat analyst estimates.

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McGraw Hill Financial Inc. reported profit that beat analysts' estimates even after the owner of the world's largest credit-grader agreed to pay the biggest penalty ever levied against a bond-rating company.
McGraw Hill, Profit, S&P, Probes
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2015-20-12
Thursday, 12 Feb 2015 12:20 PM
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