John Wiley & Sons Beats Q1 Earnings but Misses Revenues
John Wiley & Sons Inc. JW.A continued with its positive earnings surprise, beating the Zacks Consensus Estimate for the seventh consecutive quarter. Adjusted earnings per share for first-quarter fiscal 2016 increased 3.6% year over year to 58 cents and also exceeded the Zacks Consensus Estimate of 49 cents. However, quarterly revenues of $423 million fell short of the Zacks Consensus Estimate of $429 million, declining 3.4% from the prior-year quarter.
On constant currency basis, adjusted earnings grew 11% year over year while revenues increased 2%. Including one-time charges, earnings per share of 55 cents were down 2% year over year.
Adjusted operating profit came in at $48.3 million, down 2% (up 5% on a constant currency basis) from the year-ago quarter, whereas adjusted operating margin expanded 10 basis points to 11.4%.
Segment Details (Constant Currency Basis)
Research: The division’s adjusted revenues of $237.4 million were flat year over year as marginal decline in journal subscription offset the growth in Author-Funded Access. Research Books revenues were also flat on a year-over-year basis. The segment’s adjusted direct contribution to profit was $107.2 million compared with $114.5 million in the year-ago quarter. After allocating shared services and administrative expenses, the division’s adjusted contribution to profit was $65.9 million, up 1% from the prior-year quarter.
Education: Revenues for the division declined 1% year over year to $86.9 million, mainly due to a sharp decline of 17% in revenues from Print Textbooks which offset growth in Online Program Management, Custom Material, and Digital Books. Adjusted direct contribution to profit was $23.3 million, down 14% year over year, whereas contribution to profit after allocating shared services and administrative expenses was $4.7 million, declining 37% year over year.
Professional Development: Revenues grew 10% to $98.7 million, driven by robust organic growth in Online Test Preparation and two extra months of corporate learning results for CrossKnowledge in the first quarter of fiscal 2016. The division’s adjusted contribution to overall profit came in at nearly $41.3 million, up 28% year over year. Adjusted contribution to profit after allocating shared services and administrative expenses was $19 million, up substantially by 147% from the year-ago quarter.
Other Financial Details
The company reported cash and cash equivalents of $369.4 million, inventories of $58.7 million and long-term debt of $750.5 million along with shareholders’ equity of $1,080 million for the quarter.
John Wiley, which competes with Pearson plc PSO, reported negative free cash flow of $154.6 million in the first quarter, in comparison to negative free cash flow of $123.3 million in the year-ago period.
Nevertheless, the company bought back 230,400 shares for $12.7 million in the reported quarter.
Outlook
The company has reaffirmed its fiscal 2016 guidance. Due to transitional impact of shifting to time-based journal subscription agreements and foreign exchange currency headwinds, the company expects its fiscal 2016 revenues to increase in the low-single-digits and earnings per share growth rate to remain flat year over year on a constant currency basis. However, this Zacks Rank #4 (Sell) company believes this shift will not have any impact on free cash flow.
Stocks to Consider
Some better-ranked stocks include News Corporation NWS and New Media Investment Group Inc. NEWM. Both the stocks hold a Zacks Rank #2 (Buy).
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