John Wiley & Sons, Inc. JW.A is well positioned, given its robust strategies like expansion through buyouts and cost-saving efforts, among others. These upsides are likely to keep this Zacks Rank #3 (Hold) company shielded from soft publishing revenues and escalated investment costs.
Further, we expect such growth efforts to fuel further momentum at John Wiley, which has gained 0.9% in the past three months against the industry’s decline of 3.2%. Let’s delve deeper.
Key Growth Drivers
John Wiley has acquired several publishing and distribution companies along with various online service providers. In this regard, it took over Knewton in May 2019, which strengthens its position in the adaptive learnings and affordable content category. The company acquired The Learning House, an education services provider, in November 2018. This has helped the company strengthen its position in the fast-growing education services market. Notably, this acquisition has been driving John Wiley’s revenues.
Notably, the company’s Solutions and Research segments have been performing well for the past few quarters. The Solutions segment witnessed sales growth of 30% in the fourth quarter of fiscal 2019, following 25% in the third quarter, and 8% each in the second and first quarters of fiscal 2019. The company had earlier anticipated sales in this segment to grow low-single digit for fiscal 2019. Meanwhile, its Research division is the largest and most profitable segment with a robust market position. Sales at the segment grew 4% at constant currency (cc), fueled by growth in Open Access and Journal subscriptions.
Obstacles Likely to be Countered
On the contrary, the company has been witnessing revenue declines at its Publishing segment for quite some time now. During the fourth quarter, sales dropped 1% at cc due to dismal performance by Educational Publishing, STM and Professional Publishing. Continued shift from the print textbooks toward digital sources is weighing on revenues of the Educational Publishing business. Management anticipates revenues from its newly-aligned Education and Professional Publishing segment to be $690-$700 million for fiscal 2020 compared with $705 million in fiscal 2019.
Nonetheless, John Wiley is focused on keeping pace with the evolving trends. To this end, the company has resorted to aggressive restructuring and is focusing on building a more favorable product mix, as digital services/products generate higher margins and are likely to offset the declining revenues from print media. Notably, the company’s revenues from digital sources increased around 75% in fiscal 2019 from 63% in fiscal 2016. Further, the company has shifted the online library to AtyponLiteratum platform, which will not only accelerate its technology roadmap but also lower costs.
Additionally, we commend John Wiley’s plans to realign cost structure, reinvest in areas with high growth potential and efficiently allocate resources. The company is progressing well with its multi-year business optimization program, which is generating solid savings and enhancing efficiency. Markedly, management anticipates savings for the three-year period to be nearly $100 million.
These factors are likely to help John Wiley battle cost hurdles stemming from elevated investments for growth and optimization of Research and Education Services businesses. All said, we expect this publishing company to see brighter days ahead.
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