John Wiley & Sons (JW.A) Beats On Q2 Earnings, Revenues

After commencing fiscal 2017 on a soft note, John Wiley & Sons Inc.’s JW.A made a sharp come back by delivering a positive earnings surprise in the second quarter. Total revenue also came ahead of our expectations, after missing in the preceding two quarters. The company’s performance in the reported quarter was primarily driven by solid performance Journal Revenue, Online Program Management, Corporate Learning and Online Test Preparation.

Following robust results, we believe the stock, which have outperformed the Zacks categorized Publishing-Books industry, with a year-to-date return of 24.5% compared with 19.2% for latter will carry the momentum ahead.

John Wiley & Sons reported adjusted earnings of 76 cents per share that beat the Zacks Consensus Estimate of 70 cents. However, the earnings declined 3% year over year.

Further, the company reported revenues of $425.6 million, which surpassed the Zacks Consensus Estimate of $422 million but decreased 2% from the year-ago quarter.

On a constant currency (cc) basis, adjusted earnings rose 3% year over year while revenues gained 4.2%. Including one-time charges, the company reported loss of 20 cents compared with a profit of 74 cents in the prior year quarter.

Adjusted operating income came in at $63.3 million, down 1% (up 3% at cc) from the year-ago quarter. However, adjusted operating margin expanded 10 basis points to 14.9%.

Segment Details (at cc)

Research: The division’s adjusted revenues of $206 million climbed 5% year over year, fueled by a rise in Journal Revenue. The segment’s adjusted direct contribution to profit was $100.5 million that increased 6% from last year. After accounting for shared services and administrative expenses, the division’s adjusted contribution to profit was $60.5 million, flat with the prior-year quarter.

Publishing: Revenues at the division declined 5% to $163.3 million, as dismal Books and Reference Material revenue could not be compensated by strength noted in Online Test Preparation, Course Workflow and Licensing and Other. Adjusted direct contribution to profit by the division fell 1% year over year to $76.6 million. In addition, contribution after allocating shared services and administrative, the division’s adjusted operating profit came in at $36.7 million, up 8% year over year.

Solutions: Revenues surged 14% year over year to $56.3 million, boosted by robust performance of Online Program Management and Corporate Learning. The division’s adjusted direct contribution to overall profit was nearly $14.4 million, up 31% year over year. Adjusted contribution to profit after allocating shared services and administrative expenses improved 129% from the year-ago quarter to nearly $5.6 million.

Other Financial Details

The company ended the quarter with cash and cash equivalents of $267.4 million and net debt of $616.6 million.

John Wiley, which shares space with Pearson (LON:PSON) plc (NYSE:PSO) , A.H. Belo Corporation (NYSE:AHC) and Scholastic Corporation (NASDAQ:SCHL) used free cash flow of $155.4 million in the second quarter of fiscal 2017, compared with $192.7 million used in the year-ago period. Management stated that the free cash flow is usually negative in the first half, owing to the cash collection timings for journal subscriptions that occur on annual basis.

Nevertheless, the company bought back 193,955 shares for $10 million in the reported quarter, leaving more than 4.3 million shares pending under the standing authorization.

Other Developments

In the previous month, John Wiley completed the acquisitions of California-based Atypon. This publishing software and service provider helps publishers and scholarly societies to improve, provide, advertise and handle their content online.

Outlook

John Wiley reiterated its previously announced fiscal 2017 guidance. The company still expects earnings to be down by mid-single digits and revenues to be flat on a year-over-year basis, excluding foreign exchange, the favorable impact from the shift to time-based journal subscription agreements and impact from Atypon’s and Ranku buyout. Moreover, the impact of the shift to time-based journal subscriptions will boost revenues and earnings by nearly $37 million and 42 cents per share, respectively.

John Wiley currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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