Morningstar | Solid End to Fiscal 2019 Does Not Change Our Long-Term Outlook for Wiley
We do not plan a large change to our $51 fair value estimate for wide-moat John Wiley & Sons after an on-track end to fiscal 2019. Management said it expects fiscal 2019-20 investments to lead to meaningful sales and profitability improvements by fiscal 2022, consistent with our forecasts. We were more optimistic than most about Wiley’s long-term prospects and had underestimated fiscal 2020 investment needs, likely resulting in our more muted reaction than the shares’ high-single-digit uptick after the announcement.Wiley posted $1.80 billion in fiscal 2019 revenue against a 12.6% adjusted operating margin and $2.96 in adjusted diluted EPS, not far from our $1.82 billion, 12.4%, and $2.95 full-year targets. Management calls for $1.84 billion-$1.87 billion in fiscal 2020 revenue and $2.45-$2.55 in adjusted EPS, with the earnings dip attributed to investments and acquisition-related amortization and other costs. Wiley set three-year targets for compound annual growth rates of 3%-4% in revenue, 4%-5% in adjusted EBITDA, and 5%-6% in adjusted EPS from fiscal 2019 to 2022. Our preannouncement targets were 3%, 4%, and 5%, respectively.
Though the education services unit is small today (roughly 9% of revenue), management identified it as a growth engine. We concur and expect the Learning House deal improved the firm’s attractiveness as an online program management partner. The product benefits from long-term contracts and imposes switching costs as Wiley takes on course administration, content delivery, and student recruitment with a bespoke solution embedded in partners’ processes. While the research publishing and platforms unit (52% of revenue) should remain the sales and profitability leader well beyond fiscal 2022 and the education and professional publishing segment (39% of revenue) should struggle amid continued textbook challenges, we expect education services to drive profitability growth and contribute increasingly to Wiley’s competitive edge.
John Wiley & Sons is a global research and learning company. Co. has three segments: Research segment, which provides scientific, technical, medical, and scholarly journals, as well as related content and services to libraries and individual researchers, among others; Publishing, which provides scientific, professional, and education books and related content in print and digital formats, test preparation services and course workflow tools, to libraries, corporations, students, professionals, and researchers; and Solutions, which provides online program management services for higher education institutions and learning, development, and assessment services for businesses and professionals.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.