John Wiley & Sons (JW.A) Tops Q4 Earnings, Revenue Estimates

John Wiley & Sons, Inc. JW.A posted better-than-expected results in the fourth quarter of fiscal 2018, wherein both the top and the bottom line surpassed the Zacks Consensus Estimate. While earnings beat estimates for the seventh consecutive quarter, sales recorded the fifth straight beat.

Despite the earnings and sales beat, not much movement was witnessed in the stock, thanks to the soft fiscal 2019 outlook. However, this Zacks Rank #3 (Hold) stock has rallied 10.3% in the past six months, outperforming the industry’s gain of 8%.

Q4 in Details

John Wiley & Sons reported adjusted earnings of 94 cents per share, outpacing the Zacks Consensus Estimate of 81 cents. Further, the bottom line increased 14.6% from 82 cents in the year-ago quarter. Also, on a constant currency (cc) basis, adjusted earnings were up 6% year over year.

Further, revenues of $477.3 million improved about 5.6% year over year (up 1% on a cc basis) and outpaced the Zacks Consensus Estimate of nearly $452 million. The year-over-year increase can be attributable to sales growth at the Research and Solutions segments, partly offset by decline at the Publishing division.

Adjusted operating income came in at $76.9 million, compared with $61.7 million in the year-ago quarter. The upside was primarily driven by savings from efficiency gains and higher revenues. The figure also grew 15% on a cc basis. Adjusted operating margin jumped 250 basis points to 16.1%. However, cost of sales increased 5.1%, and operating and administrative expenses inched up 1.5%.

Segmental Details

Research: Sales at this division was $258.4 million, up 10% year over year fueled by solid contributions from Open Access and Journal subscriptions. On a cc basis, top line at this segment grew 5%. Furthermore, rise in Licensing, Reprints, Backfile and Other revenues contributed to sales growth. The segment’s adjusted contribution to profit was $83.7 million compared with $80.3 million in the prior-year quarter. On a cc basis, the same declined 2%.

Publishing: At this division, sales dipped nearly 2% to $151.1 million (down 5% on cc basis) on account of soft performance by STM and Professional Publishing. This offset growth in Educational Publishing and Course Workflow (WileyPLUS). While adjusted contribution to profit declined 12% to $27.5 million, the same decreased 19% on a cc basis.

Solutions: Revenues at this segment increased 6% year over year to $67.7 million (up 2% on a cc basis) on robust performance by Education Services/Online Program Management, Professional Assessment and Corporate Learning. The division’s adjusted contribution to overall profit was $10.6 million, up from $5.9 million a year ago reflecting growth of 80%. Also, on a cc basis, the same surged 80%.

Other Financial Update

John Wiley & Sons ended the quarter with cash and cash equivalents of $169.8 million, long-term debt of $360 million and shareholders’ equity of $1,190.6 million.

Notably, the company provided $373.8 million of cash by operating activities in fiscal 2018. Further, the company reported free cash flow (net of Product Development Spending) of $223.9 million at the end of the quarter compared with $166.2 million a year ago.

Management expects cash provided by operations to decline high-single digit in fiscal 2019 from $373.8 million in the prior year.

Furthermore, the company bought back shares worth $40 million and utilized $74 million in fiscal 2018.

Guidance

Management provided guidance for fiscal 2019. Revenues are expected to be flat year over year at $1796.1 million while adjusted earnings (at cc) are anticipated to decline mid-single digit year over year from $3.43. The Zacks Consensus Estimate for fiscal 2018 earnings and revenues is pegged at $3.30 and $1.77 billion, respectively.

Further, capital expenditures (at cc) are expected to be modestly lower than $149.9 million incurred last year.

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