Stock of the Day Jun 29, 1999 John Wiley: Booking Strong Profits by Adam Lowensteiner 6/29/99
Amazon.com (NASDAQ:AMZN - news) may be the glamorous play on the book business these days. Which might explain why little John Wiley & Sons (NYSE:JW - news) /A) which has been around since 1807, continues to surprise investors. In the last two quarters, its earnings have come in ahead of expectations by an average of 34%.
Apparently investors haven't noticed that over the last five years, Wiley has grown its earnings at a 26.6% annual rate. This is more than double the pace of the average company in the S&P 500, which has grown its earnings an average of 10.3% a year. In the fourth quarter of fiscal (April) 1999, revenue grew 9% due to a 14% increase in its professional/trade publishing business. The company also witnessed solid increases in its scientific, technical and medical publishing, as well as in its educational publishing unit. For the full year, revenue rose 9% to $508.4 million. Net income jumped 48% to $39.7 million, or $0.60 per diluted share, for the full year. For the fourth quarter alone, net income swelled 54% to $6.5 million, or $0.10 per diluted share, compared with $4.2 million, or $0.06 per diluted share, in the prior year's fourth quarter. Analysts were looking for $0.07 per share. 'Wiley has a steady, predictable business,' says Jeff Hershey of Awad Asset Management, which has a 1.8% stake in Wiley, or about 648,000 shares. One reason: Customers of its trade publications and journals business typically pay up front like they would for a magazine subscription rather than after delivery. Wiley has always used its strong balance sheet to buy companies that would eventually be accretive to earnings. So, it's no surprise the company recently made two acquisitions in recent weeks.
wiley does not have a great history of informing their shareholders or the public what is up, as you know. the houghton rumor has been around for lord knows how long, at least since the mid 80's. there was some talk about spinning out college in a joint venture with houghton college. i do know that the houghton ceo is seen at wiley from time to time. a merger would create issues of leadership---pesce would never give up control---name, location. i believe the lease on 605 third is up very soon and i have no idea if they are staying.a merger woould drive the price higher.
i believe one of the catalysts to the runup to 25 was the feeling that they could sell their college division since they certainly have had generous offers. anyway---the stock is so tightly held that anyone who wants out of a position will not get the best price.
the stock price could be just a matter of selling on good news---stock was stuck between 19-22. some correction from a high of 25!
On June 17 it shelled out $82 million in cash for Jossey-Bass, a publisher of books and journals for professionals and executives, primarily in the areas of business, psychology and education/health management. The 32 year-old firm published over 200 titles last year, and could wind up doing more this year. Wiley also grabbed certain publishing assets from Pearson Education, including college textbooks and instructional packages in biology/anatomy and physiology, engineering, mathematics, economics/finance and teacher education. This acquisition, which closed after the most recent quarter ended, will have a neutral effect on earnings this year, but have a positive contribution next year, according to management. More importantly, this move sweetens Wiley's presence in the college publishing business. 'The education segment is growing as more people go to college,' notes Hershey. Another project Wiley is involved in is its Wiley InterScience, a service Wiley started in 1997 in which subscribers could tap into a database of more than 300 journals that Wiley has published. Since it began commercializing InterScience about six months ago, it has signed up more than 2,400 institutional customers. Management has definitely treated investors well in the last year, with the stock appreciating over 40%, including two stock splits (both 2-for-1), a share buyback of 4 million shares, and an increase in the dividend. The company recently raised its dividend for the sixth straight year, and also announced plans to repurchase another 4 million shares.
Shares of Wiley have not been fairing well in 1999, however, falling about 18% from the beginning of the year to a recent $20.13. But the Bass family obviously saw this as a buying opportunity, and added to its Wiley stake by purchasing (on a post split basis) 180,000 shares at around $20 a