Studying John Wiley & Sons: Why Its Stock Will Continue to See All-Time Highs
John Wiley & Sons Inc (NYSE:JWA) is a company that most people who attended school in the United States and Canada are probably familiar with, at least indirectly. The company is very profitable, and I think the stock is set to soar on the back earnings.
The company provides knowledge and knowledge-based services in areas of research, professional development, and education to customers worldwide. The company’s Research segment offers journals, books, reference works, databases, clinical decision support tools, and laboratory manuals and workflow tools in the areas of the physical sciences and engineering, health sciences, social science and humanities, and life sciences. This segment serves academic, corporate, government, and public libraries as well as researchers, scientists, clinicians, engineers scholarly and professional societies, students and professors. This segment sells and distributes its products online and in print through research libraries and library consortia and independent subscription agents, as well as directly to professional society members, bookstores, and online booksellers.
The company’s Professional Development segment acquires, develops, and publishes professional books, subscription products, certification and training services, and online applications in the areas of business, finance, accounting, workplace learning, management, leadership, technology, behavioral health, engineering/architecture, and education. This segment distributes its products through chains and online booksellers, independent bookstores, libraries, colleges and universities, warehouse clubs, corporations, direct marketing, Websites, and other online applications, as well as directly to consumers. The company’s Education segment produces and delivers educational content and services, including online program management for colleges and universities. It also offers integrated online teaching and learning resources for instructors and students.
In its most recent quarter, the company saw adjusted revenue (on a constant currency basis) rise 2 percent to $457 million. Adjusted revenue excludes $5 million of revenue from the divested consumer publishing programs in the prior year. Education and Research drove results as revenues in each were up 10 and 2 percent respectively, offsetting a 2 percent decline in Professional Development. Revenue grew 1 percent on a GAAP basis excluding foreign exchange. Adjusted earnings per share on a constant currency basis grew 4 percent to $0.77. Adjusted earnings per share excludes certain one-time or unusual items in both years as further described in the attached reconciliation of U.S. GAAP to Adjusted earnings per share. The divested consumer publishing programs did not have a material impact on earnings per share in the prior year period. U.S. GAAP earnings per share for the fourth quarter was $0.60 vs. $0.13 in the prior year, demonstrating incredible growth.
What you should also know is that Wiley acquired Profiles International in the most recent quarter for $51 million. After the quarter closed, Wiley acquired CrossKnowledge for $175 million. Profiles International, a pre-hire assessment and talent management provider, reported $27 million of revenue and over $5 million of earnings in its fiscal year ending December 31, 2013. Cross Knowledge, a learning solutions provider focused on leadership and managerial skills development, reported over $37 million of revenue and $9 million of earnings in its fiscal year ending June 30, 2013. The acquisitions were financed with cash-on-hand and capacity available under its revolving credit facility. They will also help drive Wiley’s top and bottom lines going forward.
Now, it is also important to note that Wiley recorded an additional restructuring charge of $15.4 million ($0.17 per share) in its quarter related to its previously announced restructuring program. Including this charge, Wiley has recorded $67.2 million in restructuring charges since the program was announced in January 2013. Plans have been completed to achieve $80 million in run rate savings, beginning in Fiscal 2015. Approximately half of these savings will be reinvested in the business. Further helping the company and the stock is that the company repurchased 437,800 shares for $24.8 million, an average cost of $56.79 per share. President and CEO Steve Smith stated:
“We are very pleased with our operational performance this year, including our continued progress in expanding Wiley’s depth and breadth as a provider of knowledge-enabled solutions. We exceeded our annual guidance for adjusted revenue growth and earnings, successfully executed on our restructuring plans to achieve a lower and more flexible cost structure, and recently acquired two companies that position Wiley to become a solutions leader in professional learning and development. Our share of revenue from print books is down to 29%, and through organic investment and targeted acquisitions, and by integrating content, technology, and services, we have accelerated our strategy to provide professionals, students, and researchers with valued solutions that serve their needs from education through employment.”
Looking ahead the stock is setting up nicely. The company believes that fiscal year 2015 will deliver mid-single-digit revenue growth and earnings per share in a range of $3.25 to $3.35, including a 10-cent per share dilutive earnings impact from recently acquired CrossKnowledge and Profiles International. These acquisitions however will continue to drive earnings and subsequently the stock higher, beyond its now current all-time high share price of $60.18.
Disclosure: Christopher F. Davis holds no position in John Wiley & Sons but may initiate a long position in the next 72 hours. He has a buy rating on the stock and a $72 price target.