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4-Traders Homepage  >  Equities  >  Nasdaq  >  FBR & Co    FBRC

Delayed Quote. Delayed  - 02/08 11:44:20 am
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McGraw Hill Plans to Shed Family Name After 128 Years

02/04/2016 | 08:36am US/Eastern

McGraw Hill Financial Inc. is preparing to change its name to S&P Global Inc. later this year, a symbolic move that underscores the firm's shift away from its publishing roots.

The new name has received approval from McGraw Hill's board, and company officials will soon file a proposal seeking to amend the firm's moniker, Chief Executive Douglas L. Peterson said in an interview. Shareholders will vote on the matter on April 27 at the company's annual meeting.

The New York firm, which owns Standard & Poor's Ratings Services, disclosed the planned name change Thursday as it reported an 8% increase in fourth-quarter profit that topped analysts' estimates. The boost in earnings was a surprise due to a slowdown in global bond issuance. Investors cheered the results, driven largely by the company's nonratings operations, sending McGraw Hill shares up 6.7% to $86.16 in midday trading.

On the company's earnings call Thursday, Mr. Peterson, a former Citigroup Inc. executive, said he expects global economic growth to remain in line with prior years. He also expects the Federal Reserve to raise interest rates twice in 2016 but remain on hold in March.

"Excessive pessimism is probably not warranted," Mr. Peterson said. "Recent stock-market volatility probably overstates the likelihood of slumping global growth this year."

Global bond issuance fell 22% in the fourth quarter, and revenue at the S&P ratings division?McGraw Hill's largest unit?declined 7%. But other divisions selling commodities pricing or index funds buoyed the firm's performance, leading to results and outlook which "were not as bad as feared," said William Bird, an analyst for FBR & Co., in a note to investors. The company's profits also got a boost from lower-than-expected tax rates.

The move to drop the McGraws from the company's name for the first time in its 128-year history follows decisions in recent years to spin off an education division and move the corporate headquarters from a midtown Manhattan skyscraper bearing the founder's name to a location downtown.

"The name of McGraw Hill, which is an absolutely fantastic brand, didn't necessarily fit the rest of the company," said Mr. Peterson in the interview. "McGraw Hill is definitely seen as a publishing brand."

In addition to the S&P ratings unit, McGraw Hill owns two other divisions with the S&P name?S&P Capital IQ and S&P Dow Jones Indices. It also operates a major commodities-pricing division. The S&P Capital IQ division will be eventually renamed S&P Global Market Intelligence.

Under Mr. Peterson, McGraw Hill has repositioned itself as a global data-analytics firm. The company bought financial-data provider SNL Financial LC last year for $2.2 billion and will pursue a sale of its J.D. Power division, best known for customer-satisfaction surveys.

The Wall Street Journal reported early last year that senior executives and employees were having informal discussions about changing the McGraw Hill name. Harold "Terry" McGraw III, the great-grandson of the company's founder and a former CEO of the company, relinquished his chairmanship of McGraw Hill last year.

According to the company's most recent proxy statement, Mr. McGraw owns more than 9 million shares, or 3.4%, of McGraw Hill.

Mr. Peterson said the name change has the support of all board members, as well as of Mr. McGraw, who is chairman emeritus. Interest in calling the firm S&P Global picked up over the past nine months, Mr. Peterson said.

In 1966, McGraw Hill purchased S&P, a company that produced bond evaluations and whose own origins date back to 1860, according to the company's website.

McGraw Hill swung to a fourth-quarter profit of $248 million, or 91 cents a share, compared with a year-earlier loss of $846 million, or $3.11 a share. The prior-year results included legal settlements related to crisis-era lawsuits over inflated grades of residential-mortgage deals. Excluding restructuring- and acquisition-related expenses and other items, per-share earnings from continuing operations were $1.04. Revenue increased 7% to $1.37 billion. Excluding currency effects, the growth was 8%.

Analysts polled by Thomson Reuters expected adjusted profit of $1.01 a share and revenue of $1.38 billion.

For the year, McGraw Hill forecast per-share earnings of $5 to $5.15 and revenue growth in the mid- to high-single digits on a percentage basis. Analysts polled by Thomson Reuters expect per-share profit of $4.88 and revenue of $5.82 billion.

Write to Timothy W. Martin at timothy.martin@wsj.com

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