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McGraw-Hill Defends S&P Unit, Beats Street Forecast

Scott Eelis | Bloomberg | Getty Images

McGraw-Hill, which is being sued by the U.S. government for bond ratings issued by its Standard & Poor's unit, reported a surge in quarterly adjusted profit and said it does not believe the government can prove its case.

The government filed a $5 billion civil lawsuit against S&P earlier this month, alleging that it had inflated ratings on mortgage-backed securities during the financial crisis.

"The company does not believe the Department of Justice can prove that this failure — common to nearly everyone at the time — was the product of intentional misconduct by anyone at S&P," the company said in a statement. "S&P has a record of successfully defending these types of cases, with 41 cases dismissed outright or voluntarily withdrawn."

Shares of the company, which have lost nearly a quarter of their value since the government launched the suit, were down slightly in pre-market trading. (Click here to track McGraw-Hill stock following the announcement.)

S&P rival Moody's, which is also expected to be the target of a federal lawsuit over its pre-crisis debt ratings, forecast a strong 2013 when it reported results last week but its shares fell 8 percent.

(Read More: Lawsuit Fears Overshadow Moody's Earnings)

S&P has hired John Keker, one of the country's top white-collar defense attorneys, to fight the lawsuit. The combative Keker won credit from legal experts in 2006 when Andrew Fastow, considered the mastermind of the Enron fraud, was sentenced to only six years in prison.

Adjusted Quarterly Profit Jumps

McGraw-Hill's profit from continuing operations jumped 76 percent on a surge in debt issuance.

Income from continuing operations rose to $190 million, or 67 cents per share, in the fourth quarter from $113 million, or 37 cents per share, a year earlier.

Revenue rose 22 percent to $1.23 billion.

Adjusted earnings per share from continuing operations rose to 72 cents per share, in line with analysts' estimates, according to Thomson Reuters.

McGraw-Hill posted a net loss of $216 million during the quarter. The loss includes one-time costs related to the sale of its education unit to Apollo Global Management in November. The company had said it would take a non-cash impairment charge of about $450 million to $550 million in the fourth quarter to mark down the value of the unit.

McGraw-Hill said it expected 2013 adjusted earnings per share of $3.10 to $3.20 for McGraw Hill Financial, which includes S&P. It said it expects high-single digit percentage growth in revenue for the unit this year.

McGraw-Hill shares closed at $44.28 on the New York Stock Exchange on Monday.

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