McGraw-Hill Fourth-Quarter Profit Rises on Information Units

McGraw-Hill Cos., the credit rating and publishing company that’s splitting in two, said profit rose 39 percent, boosted by stock buybacks and increased revenue from its information and financial services divisions.

Fourth-quarter net income increased to $214 million, or 73 cents a share, from $153.8 million, or 50 cents, a year earlier, the New York-based company said today in a statement. Earnings excluding some items were 63 cents a share, beating the 57-cent average of seven analysts’ estimates compiled by Bloomberg.

McGraw-Hill, the owner of Standard & Poor’s, said Sept. 12 it will break into two companies, one focused on financial information and the other on educational publishing, by the end of this year. While McGraw-Hill is cutting costs and accelerated the pace of its share repurchases last year, profit at the S&P ratings unit fell as companies postponed bond sales amid the European debt crisis.

“The global credit markets were down significantly in the fourth quarter,” Chief Executive Officer Harold “Terry” McGraw III said today on a conference call with analysts. “We do expect continued volatility in 2012.”

McGraw-Hill fell 0.7 percent to $46 at the close in New York. The stock has climbed 14 percent since the company announced the planned split in September.

2012 Outlook

Fourth-quarter sales rose 1.6 percent to $1.52 billion, the company said. It forecast earnings per share for full-year 2012 of $3.25 to $3.35, higher than the $3.22 predicted by analysts.

Operating profit at S&P ratings fell 24 percent to $156 million in the fourth quarter, excluding the cost of firing 30 workers.

The breakup of the company is on schedule for the second half of 2012, McGraw said.

“We’re going to do everything we can to accelerate this as best we can,” McGraw said.

As part of a plan to cuts $100 million in costs, the company eliminated 800 positions. McGraw-Hill also sold its broadcast unit to E.W. Scripps Co. for $123 million in December.

Fourth-quarter profit was boosted by McGraw-Hill’s commodities and commercial unit, formerly known as information and media, which includes Platts, a service that provides news and data about the energy industry. Platts’s revenue grew 24 percent.

“The Platts business has been phenomenal,” said Peter Appert, an analyst with Piper Jaffray & Co., who has an “overweight” rating on McGraw-Hill shares. “That will be the biggest profit generator within that segment.”

Operating profit from McGraw-Hill’s index and financial information business increased 29 percent in the quarter.

McGraw-Hill began a strategic review in 2010 of the company’s businesses. Last August, Jana Partners, a New York-based hedge fund and investor in the company, proposed a plan to break up McGraw-Hill after education revenue fell for three straight quarters.

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