If you curl up routinely with BusinessWeek, you may think of McGraw-Hill (NYSE: MHP) as a media company, and you're probably amazed by its third-quarter results when other large media companies -- like McClatchy (NYSE: MNI) -- seem to be sliding. However, that's the smallest slice of the company's revenue pie, which also includes financial-services and education segments.
For the quarter, the Inside Value pick earned $452 million, up 18% from $382 million a year ago. Diluted per-share earnings were $1.34, versus $1.06 -- with last year's results including a $0.03 restructuring charge. The company's revenue increased nearly 10% to $2.19 billion, from $1.99 billion last year.
Revenue for the education unit, which produces textbooks and other education materials for all levels of students and professionals, grew by 9.9% to $1.2 billion in the quarter, while operating profit for the unit was up by 16.1%. The third quarter is a big one for this segment because it includes the beginning of the school year.
At the same time, financial services -- which includes Standard & Poor's research, indexes, and ratings -- grew its revenue by 12.5% to $759.6 million. While structured finance and mortgage-backed securities were affected by the credit market and subprime woes, the segment's international exposure helped offset the domestic effects.
The information and media group increased its revenue by 2.1% to $252.4 million. In addition to BusinessWeek, this sector includes business brands such as Platts, J.D. Power and Associates, McGraw-Hill Construction, and Aviation Week.
So McGraw-Hill, which did begin as a media company, isn't suffering the same travails as New York Times (NYSE: NYT) or Gannett (NYSE: GCI), for instance. In fact, if a comparable company were to be found for McGraw-Hill in the media space, it likely would be Dow Jones (NYSE: DJ), which also caters to the business and financial community and similarly had a solid quarter.
Beyond that, and especially in a time of crunching credit, all three of McGraw-Hill's units combine to provide strong revenue underpinnings and steady earnings growth. And with its combination of a harp-section high 50% trailing return on equity and a forward dividend yield of 1.6%, it seems to me that there's a lot to like about the company.
On these bases, and with a market that has taken to flip-flopping somewhat menacingly on an almost daily basis, McGraw-Hill represents an attractive combination of expanding businesses and attractive metrics. I believe it should stand out on the radar screens of value-oriented Fools.
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