The Zacks Analyst Blog Highlights: McGraw-Hill, Moody's, The New York Times, Apollo Global Management and SLM Corp.
CHICAGO, Feb. 7, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include The McGraw-Hill Companies, Inc. (NYSE: MHP), Moody's Corp. (NYSE: MCO), The New York Times Company (NYSE: NYT), Apollo Global Management, LLC (NYSE: APO) and SLM Corporation (Nasdaq: SLM).
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Here are highlights from Wednesday's Analyst Blog:
McGraw-Hill Hit by S&P Lawsuit
Shares of The McGraw-Hill Companies, Inc. (NYSE: MHP) plunged 23% in the last two days as investor sentiment wavered following the news of a civil lawsuit filed by the United States Department of Justice against its subsidiary, Standard & Poor's Rating Services (S&P) for deliberately providing high ratings in 2007 to U.S. collateralized debt obligations (CDOs) and residential mortgage backed securities (RMBS) that underperformed and fueled the collapse of the housing market.
S&P has strongly denied the allegations of the Department of Justice, which is seeking approximately $5 billion in the lawsuit, Reuters reported. The U.S. Government stated that S&P did not properly highlight the credit risks related to the mortgage securities issued by the investment banks in order to get more business from them.
However, S&P stated that the ratings were provided on the basis of subprime mortgage data that was accessible to others as well as government officials, who in 2007 claimed that subprime woes have limited impact.
The lawsuit filed by the government is the first legal action undertaken against a rating firm. The two other industry bellwethers, Moody's Corp. (NYSE: MCO) and Fitch Ratings are still not on the radar. Rating companies have been facing criticism for the procedure by which they had assigned a grade to the mortgage securities since the financial crisis. S&P provided credit ratings on over $2.8 trillion of RMBS and approximately $1.2 trillion of CDOs between Sep 2004 and Oct 2007.
Earlier, the discussion between S&P and the government officials failed, when the latter demanded a penalty of above $1 billion, reported by The New York Times, the flagship newspaper of The New York Times Company (NYSE: NYT). S&P said that it employed approximately $400 million in the last 5 years to strengthen the reliability, objectivity, independence and performance of ratings. Moreover, it has now set tough criteria for the securities to attain AAA ratings, considering the challenging global economy.
McGraw-Hill, which holds a Zacks Rank #3 (Hold), is slated to report its fourth-quarter 2012 results on Feb 12, 2013. The company previously entered into an agreement with Apollo Global Management, LLC (NYSE: APO) to divest its education division for $2.5 billion.
The move is a strategic attempt on the company's behalf to restructure its portfolio of businesses and concentrate more on high growth operations, thereby enhancing shareholder value through proper capital allocation.
Sallie Mae Rewards Shareholders
n an effort to share more profits with the shareholders, student lender SLM Corporation (Nasdaq: SLM) – commonly known as Sallie Mae – announced a 20% hike in its quarterly cash dividend to 15 cents per share. The newly increased dividend will be paid on Mar 15, 2013 to the shareholders of record at the close of business as of Mar 1.
Concurrently, the board of directors at Sallie Mae authorized a $400 million share repurchase program for its outstanding common shares. The program does not have any expiry date.
The dividend hike as well as the new share repurchase program is supported by Sallie Mae's strong balance sheet along with its ability to generate significant cash flows. For the fourth quarter of 2012, the company reported earnings of 55 cents per share, a couple of cents ahead of the Zacks Consensus Estimate and 8% higher than the year-ago quarter. Results were boosted by higher debt repurchase gains. As of Dec 31, 2012, cash and investments stood at $5.0 billion compared with $3.9 billion as of Dec 31, 2011.
Also, during 2012, the company repurchased 58 million shares worth $900 million.
The latest dividend hike reflects Sallie Mae's commitment to provide value to its shareholders. Through this dividend payout, the company will also be able to attract investors, who are increasingly searching for high-quality dividend paying stocks in an effort to boost their income. This, in turn, will enhance investors' confidence in the stock.
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