McGraw-Hill-Financial-logo3McGraw Hill Financial, Inc.reported first quarter 2015 revenue of $1.27 billion, an increase of 6% compared to the same period last year. Net income and diluted earnings per share from continuing operations were $303 million and $1.10, respectively. Adjusted net income from continuing operations increased 24% to $299 million and adjusted diluted earnings per share from continuing operations increased 25% to $1.09. The adjustments in the first quarter of 2015 were related to insurance recoveries for legal settlements largely offset by settlement charges.

“This is a good start to 2015,” said Douglas L. Peterson, President and Chief Executive Officer of McGraw Hill Financial. “All of the Company’s businesses delivered mid-single-digit revenue growth despite the headwinds of a strong U.S. dollar.  This growth, coupled with excellent progress with ongoing productivity programs, led to a significant improvement in profitability.”

Outlook: There is no change to the Company’s guidance.  Adjusted diluted earnings per share guidance for 2015 remains $4.35 to $4.45.

2015 McGraw-Hill Q1 2015 RevenuesStandard & Poor’s Ratings Services:  Quarterly revenue increased 6% to $606 million in the first quarter of 2015 compared to the same period last year despite challenging changes in foreign exchange rates.  Transaction revenue grew 18% to $289 million compared to the same period last year. This was primarily the result of issuance increases in U.S. corporate debt and U.S. public finance offset somewhat by weakness in bank loan ratings.  Non-transaction revenue decreased 2% in the quarter, due to the strong U.S. dollar and a decline in entity credit ratings as fewer new customers were added during the quarter.  With the strength in transaction revenue, non-transaction revenue was 52% of Standard & Poor’s Ratings Services’ total revenue compared to 57% for the same period last year.

Domestic revenue increased 15% and international revenue decreased 4%. International revenue, impacted by a strong U.S. dollar and lower growth in Europe, represented 42% of Standard & Poor’s Ratings Services’ first-quarter revenue.

Expenses declined 4%.  Adjusted expenses in the quarter decreased due to recent restructuring actions, tight cost control, and favorable foreign exchange rate changes. Operating profit increased 21% to $291 million with an operating profit margin that increased 580 basis points to 48%.

Adjusted operating profit increased 19% to $285 million with an adjusted operating profit margin that increased 480 basis points to 47%.

S&P Capital IQ:  Revenue increased 6% to $320 million in the first quarter of 2015 compared to the same period last year.  Excluding previous portfolio rationalization, organic revenue growth was 7%.  Expenses increased 4% and operating profit increased 18% to $63 million.  The S&P Capital IQ Desktop product had the most meaningful impact on revenue with low-teens revenue growth resulting from a similar increase in the number of users.  S&P Capital IQ’s international revenue increased 6% to $108 million in the first quarter and represented 34% of the business unit’s total revenue.

S&P Dow Jones Indices:  Revenue increased 5% to $143 million in the first quarter of 2015 compared to the same period last year.  Expenses increased 6% driven by timing of headcount additions. Operating profit increased 4% to $95 million.  Operating profit attributable to the Company increased 5% to $70 million.  Top-line growth in the quarter can be attributed to increased mutual funds’ AUM, over-the-counter derivative trading licenses, and data subscriptions. Assets under management in exchange-traded funds based on the S&P Dow Jones Indices increased 22% to $810 billion at the end of the quarter. Trading volume of exchange-traded derivatives declined; notably, the SPX monthly contract (S&P 500 Index) and VIX (CBOE Volatility Index).  Revenue and operating profit growth was negatively impacted by a one-time revenue increase recorded in the first quarter of 2014.  As a result, revenue associated with exchange-traded funds declined modestly during the first quarter of 2015.

Commodities & Commercial Markets:  Revenue increased 7% to $225 million. Expenses decreased 1% due to tight cost control. Operating profit was $85 million in the first quarter of 2015, an increase of 23% compared to the same period last year.  These results exclude McGraw Hill Construction which was sold in 2014 and reclassified as a discontinued operation in the first quarter 2014 figures.

Platts continued to experience steady revenue growth in the high single-digits as a result of strength in price assessments and market data subscriptions.  In addition, licensing revenue from Global Trading Services increased primarily due to The Steel Index derivative activity.

J.D. Power delivered high single-digit revenue growth driven by gains in the U.S. auto business.

Source: McGraw Hill Financial Earnings Release