MCGRAW-HILL COMPANIES INC. $42 (New York symbol MHP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 293.4 million; Market cap: $12.3 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.4%; TSINetwork Rating: Average; www.mcgraw-hill.com) announced in September 2011 that it will split into two separate, publicly traded companies.

One of these new firms, McGraw-Hill Markets, will sell a variety of financial-information products. This business will include Standard & Poor’s, which provides credit ratings on bonds, and McGraw-Hill’s J.D. Power market-research firm. McGraw-Hill Markets will have annual revenue of $4 billion. International sales will account for 40% of that total.

The other company, McGraw-Hill Education, will publish textbooks for schools and colleges. This business will have $2.4 billion of annual revenue.

The company is still working on the details of the split, but it aims to hand out shares of McGraw-Hill Education as a special dividend by the end of 2012. This will probably be a tax-free transaction: shareholders will not have to pay capital gains taxes until they sell their new shares.

As part of this plan, McGraw-Hill has agreed to sell its nine television stations to the E.W. Scripps Co. (New York symbol SSP) for $212 million.

The company is also cutting 10% of McGraw-Hill Education’s workforce. The layoffs, along with savings from an earlier restructuring plan, should lower the company’s yearly costs by $100 million.

To put this target in context, McGraw-Hill earned $366.7 million in the third quarter of 2011, down 3.3% from $379.2 million a year earlier. Earnings per share fell 1.6%, to $1.21 from $1.23, on fewer shares outstanding. Revenue fell 2.5%, to $1.9 billion from $2.0 billion.

The stock has gained 9% since the company announced the breakup. McGraw-Hill trades at 14.7 times its likely 2011 earnings of $2.85 a share.

McGraw-Hill is a buy.