McGraw-Hill lowers outlook for 2009


Broadcasting revenues were down 23.1% in Q2 as McGraw Hill reported total revenues down 12.4% and told Wall Street that full year 2009 earnings will likely be at the low end of previous guidance. With BusinessWeek already on the auction block, McGraw-Hill CEO Terry McGraw refused to rule out other possible divestitures from the Information & Media unit.

Cutting costs was a main focus in Q2 McGraw said and will continue to be a priority for the rest of the year. Q2 revenues companywide declined 12.4% to $1.47 billion, but costs dropped 10.7% to $1.17 billion. Earnings per share were 52 cents per share, including six cents in restructuring charges and loss on an investment, so 58 cents excluding one-time items. The Thomson/First Call analysts’ consensus had been 55 cents.

Information & Media division revenues declined 11.5% to $236.2 million in Q2 and operating profits dropped 41.8% to $14.4 million. Within that, broadcast group revenues declined 23.1% to $20.4 million, with the company noting that both local and national sales were down. “Softness in auto advertising was clearly a contributor in this picture,” McGraw noted in his conference call with analysts. The CEO announced that the company is now expecting Information & Media division revenues to be down 8-9% for all of 2009, worse than the previous guidance of a 5-6% decline.

For the entire company, McGraw-Hill is telling Wall Street to expect full year revenues to be down 5.5-6.5%, rather than the previous guidance of down 4-5%. Earnings per share are expected to be in a range of $2.20-2.25, rather than the previous range of $2.20-2.30, “although it appears we will come in at the low end of the range.”

In light of the current effort to sell BusinessWeek, CEO McGraw was asked by one analyst whether the company might look at other divestitures in the Information & Media division. “It’s not fair to comment more broadly on that, other than to say what I’ve said all along, is that in conditions like this in particular, everything in  the portfolio gets scrutinized. We’re looking for future growth paths and the extent to which we see limitations on it, we’re going to deal with it,” Terry McGraw replied.