John Wiley on Track to Achieve Targeted Cost Reductions - Analyst Blog

On Jun 24, 2014, we initiated a research report on John Wiley & Sons Inc. (JW.A). The company covers a broad spectrum of services including education, professional development and research. The company publishes around 1,600 journals, publishes various books (both digital and print) and has several online services/products making it one of the biggest names in the publishing arena. However, with advancing technology, print media is on a decline.

John Wiley & Sons is transforming itself into a digital services oriented company to combat decline in the print media. Further, the company has resorted to aggressive restructuring to boost margins and is also emphasizing on the development its IT infrastructure. The company aims to achieve $80 million in annual savings, commencing from 2015. As per management's commentary during fourth-quarter fiscal 2014 earnings call, the company is on track to achieve its targeted savings and is likely to reinvest half of these savings in the business.

In the recent concluded quarter, the company posted adjusted earnings per share of 77 cents, much ahead of the Zacks Consensus Estimate of 69 cents per share, and up 8% (or up 4% on constant currency basis) year over year.  Revenues grew 3% (or 1% on constant currency basis) year over year to $457 million and surpassed the Zacks Consensus Estimate of $445 million. Growth at Education and Research segments was partly run down by declining revenues at the Professional Development segment.

To acquire a greater market share, John Wiley & Sons has resorted to intense inorganic expansion. Over the years, the company has acquired several publishing and distribution companies along with several online service providers. We believe, as the company is undergoing transformation to digital from print media, these acquisitions will go a long way to help it achieve its goal.

John Wiley & Sons, which competes with Reed Elsevier NV ENL and Scholastic Corporation SCHL, is an attractive pick for growth and yield seeking investors. The company has continuously increased dividends and announced share buyback programs to maximize shareholder value.

Going ahead, John Wiley & Sons is expecting mid-single-digit revenue growth for fiscal 2015 and anticipates earnings in the range of $3.25–$3.35 per share. However, the company's earnings projection was below the expectations of analysts, who in turn trimmed their estimates to better align with the company's guidance. As a result, the Zacks Consensus Estimate for fiscal 2015 and 2016 fell 4.6% and 4.0% to $3.33 and $3.64, respectively.

Further, due to its widespread global operations, the company's revenue remains vulnerable to currency fluctuations. Moreover, volatility in primary raw material prices poses a serious threat to the company's bottom line.

Currently, John Wiley & Sons carries a Zacks Rank # 4 (Sell).

Key Picks from the Sector

A better ranked publishing stock worth considering includes The E. W. Scripps Company SSP, which sports a Zacks Rank #1 (Strong Buy).
 

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