BMO Capital reduced its price objective for McGraw Hill (NYSE: MH) to $19.00 from $21.00 on Thursday, while leaving its rating on the educational content and services company at Outperform. The revised target still implies notable upside relative to the stock's then-current price of $12.34, despite the shares having declined 25.21% year-to-date.
The broker's decision arrived after McGraw Hill reported a quarterly performance that BMO characterized as a "strong beat," with particularly healthy results in the Higher Education segment. Supporting the company’s operational performance, InvestingPro data shows McGraw Hill maintains gross profit margins of 80.84%.
BMO attributed the Higher Education outperformance to a combination of factors cited by the firm: market share gains, market skew growth, a 400 basis point benefit from reserve releases, and a favorable product mix. Those drivers helped prompt McGraw Hill's management to raise fiscal year 2026 guidance, which in turn led BMO to lift its internal estimates.
At the same time, BMO adjusted the stock's price target downward to "reflect more current multiples," indicating the firm balanced stronger near-term fundamentals with a more conservative valuation framework.
Not all segments performed equally. The K-12 business lagged expectations, a weaker showing that BMO highlighted. Nevertheless, the analyst emphasized where the company is focused going forward: positioning for the fiscal year 2027 adoption cycle, where McGraw Hill "continues to be well poised."
McGraw Hill also reported Q3 2026 results showing continued progress in its digital transition. The company posted total revenue of $434 million, a 4.2% increase from the prior year, and digital revenue grew 11%, underscoring gains in digital and recurring revenue streams. Despite those positive metrics, the stock fell in aftermarket trading following the announcement.
Analysts had varying expectations ahead of the report, though the record does not detail specific forecasts. As investors digest the earnings and guidance, the market focus remains on whether McGraw Hill can sustain its digital growth trajectory and convert its Higher Education momentum into durable performance across future adoption cycles.
Context for investors
For now, the picture that emerges is mixed: operational strength in Higher Education and improving digital revenue metrics are counterbalanced by softer K-12 results and a valuation reset by BMO. The new $19 target presumes continued execution but incorporates current market multiples that are lower than previously used.
What to watch next
- Progress on digital and recurring revenue growth relative to the 11% digital increase reported in Q3 2026.
- Performance and adoption trends in the K-12 segment versus the positioning for the FY2027 cycle.
- Management execution against the raised FY2026 guidance tied to U.S. Higher Education strength.