It's been a sad week for McGraw Hill, Inc. (NYSE:MH), who've watched their investment drop 19% to US$10.86 in the week since the company reported its second-quarter result. Results were roughly in line with estimates, with revenues of US$632m and statutory earnings per share of US$0.45. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the 13 analysts covering McGraw Hill are now predicting revenues of US$2.14b in 2027. If met, this would reflect a satisfactory 3.1% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to surge 126% to US$0.87. In the lead-up to this report, the analysts had been modelling revenues of US$2.15b and earnings per share (EPS) of US$0.98 in 2027. So there's definitely been a decline in sentiment after the latest results, noting the real cut to new EPS forecasts.
See our latest analysis for McGraw Hill
It might be a surprise to learn that the consensus price target was broadly unchanged at US$17.50, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values McGraw Hill at US$24.00 per share, while the most bearish prices it at US$14.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting McGraw Hill's growth to accelerate, with the forecast 6.3% annualised growth to the end of 2027 ranking favourably alongside historical growth of 3.8% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.6% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that McGraw Hill is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. The consensus price target held steady at US$17.50, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for McGraw Hill going out to 2029, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for McGraw Hill (1 is a bit unpleasant) you should be aware of.
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