Is McGraw Hill A Solid Bet?

McGraw Hill Financial, Inc. (MHFI) looks promising and could prove to be a solid bet for investors. The stock gathered momentum from its better-than-expected fourth-quarter 2013 results and an upbeat guidance. Since the earnings release on Feb 4, the stock has garnered a return of 3.4%. Additionally, the company’s long-term estimated earnings per share growth rate is 15.5%, which now seems achievable.

Investors are optimistic about this Zacks Rank #2 (Buy) stock as it posted earnings per share of 81 cents, which rose 12% from the year-ago quarter figure and beat the Zacks Consensus Estimate by a couple of cents. Total revenue increased 2% year over year to $1,250 million, reflecting strong performance across all businesses except Standard & Poor’s Ratings Services. Moreover, the reported revenues surpassed the Zacks Consensus Estimate of $1,241 million.  

Following the sturdy performance, McGraw Hill now projects adjusted earnings in the range of $3.75–$3.85 per share. The current Zacks Consensus Estimate stands at $3.80 per share for 2014. Further, the company anticipates revenue growth in mid single digits. In 2014, the company is likely to generate free cash flow worth $1 billion.

McGraw Hill is an attractive pick for investors seeking both growth and income, as the company announced a dividend hike on Jan 29, 2014. The company, raised its quarterly dividend by 7.1% to 30 cents (or $1.20 annually) from 28 cents per share (or $1.12 annually). The new payout will be given on Mar 12, 2014, to stockholders of record on Feb 26.

Additionally, the company is likely to benefit from its strategic investments aimed to generate long-term profitability. The company’s focus on high margin business through proper capital allocation is reaping success.

Further, McGraw Hill’s earnings streak makes investors optimistic about the stock’s future performance. The company has beaten the Zacks Consensus Estimate in the past 4 quarters by an average of 7.5%.

Other better-ranked stocks that investors may bet upon include Tribune Company (TRBAA), The New York Times Company (NYT) and Nielsen Holdings N.V. (NLSN).  Tribune and New York Times carry a Zacks Rank #1(Strong Buy) whereas Nielsen sports a Zacks Rank #2.

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