J.P. Morgan Overweight on McGraw-Hill

J.P. Morgan Chase & Co. is out with a research report on The McGraw-Hill Companies

and is reiterating its Overweight rating and its $46 price target on shares. In a note to clients, J.P. Morgan Chase & Co. writes, "We're reiterating our Overweight rating on McGraw-Hill shares. On Monday, the company announced plans to sell its TV Group to The E.W. Scripps Company for $212MM in cash. (McGraw-Hill disclosed its intent to divest the TV stations on June 14.) The TV Group is a tiny part of McGraw-Hill—accounting for <2% of MHP's total revenues and profits. The sale price is within our prior expectations (of $200-250MM), and we estimate it equates to about 8 times blended 2011-12E EBITDA. We'll wait for the deal to close to adjust estimates, but our hunch is that potential share buybacks could offset most of the profit loss/dilution from the TV sale. We believe McGraw-Hill's recently-announced “comprehensive growth and value plan” action could provide support for the shares near-term and we're intrigued by other possible value-enhancing levers (such as a potential Index JV with CME that was recently mentioned by WSJ, Reuters and other press reports)." Shares of MHP lost $1.06 yesterday to close at $39.94, a loss of 2.59%.