McGraw Hill Financial, Inc. (NYSE: MHFI) reported third quarter 2013 results with revenue of $1.19 billion, an increase of 7% compared to the same period last year and 8% excluding the impact of the sale of Aviation Week. Net income and diluted earnings per share from continuing operations were $235 million and $0.84, respectively. Surprisingly revenues for S&P Capital IQ grew only by 3%.
Standard & Poor’s Ratings Services: Despite a decrease in global debt issuance, quarterly revenue increased 8% to $540 million compared to the same period last year, driven by strength in bank loan ratings, entity credit ratings, and rating evaluation services. Adjusted operating profit increased 5% to $227 million with a margin of 42%. Domestic revenue increased 6% and international revenue increased 10%. Foreign exchange rates had a negligible impact on results. International revenue represented 46% of Standard & Poor’s Ratings’ total third-quarter revenue.
Tender for CRISIL Shares: On August 6, the Company completed a voluntary tender offer for additional shares of CRISIL Limited, a publicly traded company in India. As a result, the Company’s ownership in CRISIL increased from 52.8% to 67.8% which represented an incremental investment of $214 million.
Volatility in the credit markets and falling corporate debt issuance crimped growth at McGraw Hill Financial, which owns the largest rating agency Standard & Poor’s. The company said its third-quarter results were held back by confusion about the future path of interest rates, as the US Federal Reserve first floated, and then decided against, cutting its program of monetary stimulus.
S&P Capital IQ: Revenue increased 3% to $293 million in the third quarter of 2013 compared to the same period last year. Excluding ongoing portfolio rationalization, organic revenue growth was 5%. This was the highest revenue quarter for the segment. Adjusted operating profit returned to growth with an increase of 10% to $59 million.
Desktop Solutions, Enterprise Solutions and Ratings IP all delivered mid single-digit revenue growth while Proprietary Research revenue declined mid single-digits.
S&P Capital IQ’s international revenue increased by 8% to $100 million in the third quarter and represented 34% of the segment’s total revenue.
Efforts continue to invest in the more promising pieces of the business to create unique product offerings such as the new Portfolio Risk Solution and Events Driven Alerts. Simultaneously, the segment continued to fine tune its portfolio resulting in the sale of Financial Communications and the exploration of strategic options for FMR Europe.
S&P Dow Jones Indices: Revenue increased 14% to $124 million in the third quarter of 2013 compared to the same period last year. Adjusted quarterly operating profit increased 23% to $80 million. Exchange-traded funds and exchange-traded derivatives were two key drivers of revenue growth. Assets under management in exchange-traded funds based on the S&P Dow Jones Indices increased 29% to $585 billion at the end of the quarter. Trading volume of the exchange-traded derivatives SPX (S&P 500 Index) and VIX (CBOE Volatility Index) increased 18% and 26%, respectively. Revenue growth was partially mitigated by declines in mutual funds and modest growth in the data subscription business.
Commodities & Commercial Markets: Revenue increased 7% to $255 million. Adjusted operating profit increased 24% to $82 million in the third quarter compared to the same period last year.
Platts continued to experience steady revenue growth, delivering a 17% increase to $142 million for the period. Growth in petroleum product subscriptions continued to be the primary driver of double-digit growth. In addition, metals & agriculture product subscriptions delivered double-digit revenue growth while petrochemicals and power & gas reported single-digit revenue increases.
Commercial Markets’ revenue decreased 4%, however, organic revenue grew 1% excluding the sale of Aviation Week. J.D. Power delivered mid-single-digit growth primarily from its strong auto business in China.
Source: McGraw Hill Financial Press Release