New York: McGraw-Hill Cos Inc reported a 23% decline in second-quarter profit and lowered its full-year outlook, hurt by lower demand for school textbooks, credit ratings at its Standard & Poor’s unit and magazine advertising.
Net income applicable to shareholders fell to $164.1 million, or 52 cents per share, from $212.3 million, or 66 cents, a year earlier.
Excluding items including a charge to cut 550 jobs, profit was 58 cents per share, compared with analysts’ average expectation for 55 cents, according to Reuters Estimates.
Revenue fell 12% to $1.47 billion, below the average estimate of $1.54 billion. Expenses fell 11%.
Chief executive Harold “Terry” McGraw said “softness in the elementary and high school market, structured finance and advertising” reduced quarterly results. “Cost containment will be a priority all year,” he added.
The recession has caused state and local tax receipts to dry up, making it harder to buy educational materials.
Magazine advertising has also declined, including a 34% drop at the global edition of its BusinessWeek, while tight credit markets have reduced demand for debt ratings. McGraw-Hill is trying to sell BusinessWeek.
The company said full-year profit will likely be at the low end of a $2.20 to $2.25 per share range, compared with its April forecast for $2.20 to $2.30.
It projected a drop of 5.5% to 6.5% in full-year revenue, after previously forecasting a 4% to 5% decline. The new forecast indicated a range of $5.94 billion to $6.01 billion. Analysts, on average, expected profit of $2.25 per share on revenue of $6.03 billion.
Shares of McGraw-Hill closed Monday at $33.16 on the New York Stock Exchange. Through Monday, they had risen 43% this year.
Collateralized debt volume plummets
Financial services revenue fell 8% to $673.8 million, reflecting a 25% drop in US issuance volume. The decline was 84% in collateralized debt.
Investors and lawmakers have attacked S&P and its main rivals, Moody’s Corp’s Moody’s Investors Service and Fimalac SA’s Fitch Ratings, for fueling the credit crisis by assigning high ratings to risky mortgage debt.
Earlier this month, S&P said it was looking for a new bond rating chief after shifting Vickie Tillman to a new role.
Quarterly education revenue tumbled 23% to $338.6 million.
McGraw-Hill expects the market for elementary and high school textbooks in 2009 to decline 15% to 20%.
Revenue in the information and media unit, which also includes the JD Power survey firm and Platts commodities publications, fell 12% to $236.2 million.
Analysts expect Moody’s to report lower quarterly earnings on Wednesday.