NEW YORK McGraw-Hill Cos Inc reported lower quarterly textbook sales and a cautious outlook for that business, sending shares down more than 6 percent even as it reported a better-than-expected quarterly profit.
McGraw-Hill, whose businesses include the Standard & Poor's ratings company and media unit Platts, said its education business suffered as states spent less money on textbooks.
Executives told analysts on a call that their outlook for the textbook unit is cautious because state spending depends on the economy improving.
"Continuing economic recoveries and improving trends in financial markets are keys to our guidance for 2011," said Chief Executive Harold McGraw III. The company forecasts a profit of $2.79 to $2.89 per share in 2011.
The cautious outlook contributed to the shares slumping, said Evercore Partners analyst Douglas Arthur.
"The stock had a good run," he added. "To get the stock going up, you had to have a big upside surprise. That didn't happen."
Through Monday, McGraw-Hill shares were up 7 percent from the beginning of the year.
Excluding charges, McGraw-Hill's profit rose to 55 cents a share from 51 cents a year earlier. On that basis, the average analyst forecast was 53 cents, according to Thomson Reuters I/B/E/S.
McGraw-Hill shares slipped as low as $36.50 in trading on Tuesday morning, 6 percent below Monday's closing price. By Tuesday afternoon, they were down 5 percent at $37.03.
Revenue at the U.S. unit of debt ratings agency S&P rose more than 16 percent from a year earlier.
S&P, which struggled because of slumping debt issuance during the financial crisis, benefited from higher demand for ratings of bank loans, public finance and high-yield debt.
That business helped offset lower profits at McGraw-Hill's education unit, where a decline in textbook sales sent revenue down more than 7 percent.
McGraw-Hill's revenue rose more than 4 percent to $1.52 billion.
Including the charges, fourth-quarter profit fell 8 percent to $153.8 million, or 50 cents a share, from $167.3 million, or 53 cents a share, a year earlier.
(Reporting by Elinor Comlay. Editing by Lisa Von Ahn, John Wallace and Robert MacMillan)