McGraw Hill Financial, Inc. (MHFI), provider of financial information and owner of one of the top credit rating agencies (Standard & Poor’s), is slated to report its second-quarter 2014 earnings on Jul 29, before the opening bell. In the previous quarter, McGraw Hill recorded a positive earnings surprise of 2.3%. Let’s see how things are shaping up for this announcement.
Factors Influencing This Quarter
In the previous quarter, the company’s results were driven by strong performance of the Platts business and S&P Dow Jones Indices. Going forward, McGraw Hill remains well positioned in major market sectors and will likely benefit from its strategic investments in businesses to generate long-term profitability.
The company is restructuring its portfolio of businesses to concentrate more on high-growth operations, thereby enhancing shareholders’ value through proper capital allocation. However, rising competition from peers such as FactSet Research Systems Inc. (FDS) remains a concern.
Earnings Whispers
Our proven model does not conclusively show that McGraw Hill is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below:
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 97 cents.
Zacks Rank: McGraw Hill carries a Zacks Rank #2 (Buy). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:
Citi Trends, Inc. (CTRN), Earnings ESP of +6.90% and a Zacks Rank #1 (Strong Buy).
Advance Auto Parts Inc. (AAP), Earnings ESP of +4.48% and a Zacks Rank #2.
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