McGraw-Hill predicts sales drop

McGraw-Hill Cos., the owner of Standard & Poor's, said revenue will drop as much as 2 percent this year as a decline in borrowing reduces demand for the division's credit ratings.

Earnings in 2009 will be $2.20 to $2.30 a share, down from $2.51 in 2008, the New York-based company said today in a statement. Analysts anticipate $2.48 a share, the average of three estimates compiled by Bloomberg.

Chief Executive Officer Harold McGraw said 2009 will be another "challenging" year as the company issues fewer ratings and limited government spending hurts its textbook sales. McGraw- Hill has cut jobs and costs across the financial-services, education-publishing, and media units since credit-market turbulence began suppressing demand for new U.S. bond ratings in the second half of 2007.

"We're in the toughest period right now," McGraw said on a conference call today. "When we look back at some point, I think the fourth quarter of '08 and the first quarter of '09 will be the bottom."

Fourth-quarter net income declined 18 percent to $115.9 million, or 37 cents a share. Excluding costs to eliminate jobs, fourth-quarter profit topped analysts' estimates. Revenue fell 9.8 percent to $1.42 billion.

McGraw-Hill advanced 23 cents, or 1.2 percent, to $20.29 at 10 a.m. in New York Stock Exchange composite trading. Before today, the shares had lost 52 percent in the last 12 months.

The company cut 375 jobs in the fourth quarter, bringing last year's eliminations to 1,045 positions. The cuts lowered earnings by $16.4 million, or 5 cents a share.

Sales Decline

Revenue in 2009 will fall 1 percent to 2 percent compared with last year, McGraw-Hill forecast. A 2 percent drop would equal full-year revenue of about $6.23 billion.

The European Union, members of the U.S. Congress and the U.S. Securities and Exchange Commission have criticized S&P, Moody's Corp. and Fitch Ratings for ignoring conflicts of interest and risks that helped fuel the financial crisis.

S&P, the world's largest credit-rating company, named former Ernst & Young CEO Ray Groves ombudsman this month to address potential conflicts and field complaints as it tries to regain confidence among investors, regulators and lawmakers. CEO McGraw has also said that S&P is seeking to lessen its dependence on the U.S. new-issue market.

Moody's, the second-largest ratings company, plans to release fourth-quarter results Feb. 5 before U.S. markets open.