McGraw Hill Financial, Inc. could prove to be a solid bet for investors. Ever since the company posted better-than-expected fourth-quarter 2013 results and provided an upbeat guidance (on Feb 4), the Estimate has been trending upwards. For 2014, the Zacks Consensus Estimate has moved to $3.80 from $3.76 and for 2015, it has risen to $4.30 from $4.27, over the last 30 days.
Further, since the earnings release, the stock has garnered a return of nearly 6%. Recently, the stock hit a 52-week high of $82.05 on Feb 14. Additionally, the company’s long-term estimated earnings per share growth rate is 15.5%, which seems achievable.
Investors are impressed by 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 the Standard & Poor’s Ratings Services. Moreover, the reported revenues surpassed the Zacks Consensus Estimate of $1,241 million.
Following the strong performance, McGraw Hill now projects adjusted earnings in the range of $3.75–$3.85 per share. 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. Moreover, it raised its quarterly dividend by 7.1% to 30 cents per share (or $1.20 annually) from 28 cents (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 in the retail sector that warrant a look includes Tribune Co. , The New York Times Co. (NYT - Analyst Report) and Verisk Analytics, Inc. (VRSK - Snapshot Report). While Tribune carries a Zacks Rank #1 (Strong Buy), both New York Times and Verisk Analytics have a Zacks Rank #2.