JP Morgan Comments On Moody's and McGraw-Hill Companies

JP Morgan is reiterating its Overweight ratings on Moody's Corporation MCO and McGraw-Hill Companies MHP shares and lifting respective price targets to $42 and $46. The stocks have been strong YTD, bolstered by heavy corporate debt issuance globally. JP Morgan's investment thesis on MCO and MHP has been predicated on improving fundamentals and multiple “re-rating” from receding regulatory/legal overhang. While that cloud isn't completely gone, JP Morgan thinks it looks less threatening than at any time over the past 3 years, as the CRAs' legal wins are mounting, new CRA legislation is done in the US, and Europe is almost finished with its final batch of CRA rules. On the legal front, JP Morgan believes a recent ruling in the CalPERS case could make it more difficult for the plaintiff to prevail. It thinks valuations remain attractive despite recent price strength. with MCO at 14.6 times 2012E EPS and MHP at 12.6 times. JP Morgan has a $46 PT on MHP and $42 PT on MCO; Overweight on MHP & MCO MHP closed Tuesday at $39.18 MCO closed Tuesday at $34.96