McGraw Hill Financial, Inc. (MHFI) is expected to report its fourth-quarter fiscal 2014 results on Feb 3. Our proprietary model predicts that the company has a high chance of beating the Zacks Consensus Estimate in the about-to-be-reported quarter.
In the last quarter, it posted a positive surprise of 7.4%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that McGraw Hill is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. McGraw Hill has the right combination of the two key components.
Zacks ESP: McGraw Hill currently has an Earnings ESP of +2.22%. This is because the Most Accurate estimate stands at 92 cents, while the Zacks Consensus Estimate is pegged at 90 cents.
Zacks Rank: McGraw Hill carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings estimates. Conversely, the Sell-rated stocks (Rank #4 and 5) should never be considered going into an earnings announcement.
McGraw Hill’s Zacks Rank #3 and ESP of +2.22% make us reasonably confident of an earnings beat.
What is Driving Better-than-Expected Earnings?
McGraw Hill is focusing on its core business that would help it emerge as a leader among rating providers, benchmark providers and analytics in the global capital and commodity markets. As a result, the company was on a restructuring drive that concluded with the sale of McGraw Hill Construction in the prior quarter. Moreover, the company has stated that it will pursue strategic acquisitions in the near future to aid its goal of emerging as a leader in the global analytics arena.
Additionally, McGraw Hill’s Standard & Poor's Ratings Services appears to be a long-term-growth driver as corporate and U.S. structured finance issuance is picking up momentum, albeit slowly, with increasing capital infusion in the economy.
The company's strategic investments in businesses also facilitate it to generate long-term profitability. The formation of S&P Dow Jones Indices coupled with S&P Capital IQ’s acquisitions of Credit Market Analysis Limited, QuantHouse, R2 Financial Technologies and TheMarkets.com along with a significant stake (68%) in India’s leading rating agency CRISIL, position it well against its competitors to grab a wider market through superior functionality and investor oriented services, thereby boosting the company’s top-and bottom-line results.
In the trailing four quarters, McGraw Hill had outperformed the Zacks Consensus Estimate by an average of 5.1%.
Other Stocks that Warrant a Look
Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Thomson Reuters Corporation (TRI) has an Earnings ESP of +2.08% and a Zacks Rank #3.
Chipotle Mexican Grill, Inc. (CMG) has an Earnings ESP of +3.18% and a Zacks Rank #2 (Buy).
Archer-Daniels-Midland Company (ADM) has an Earnings ESP of +3.30% and a Zacks Rank #3.
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