What Happened?
Shares of educational publishing and media company Scholastic (NASDAQ:SCHL) jumped 10.6% in the morning session after the company reported third-quarter earnings results. Scholastic beat analysts' revenue and EPS expectations. Notably, the top line was powered by growth in school reading events (book fairs and clubs). Overall, it showed that the all-important back-to-school season was a success.
The top line also benefitted from the acquisition of 9 Story Media Group (an animation studio that produces educational and entertaining content for kids), which was recognized under the newly created entertainment segment. However, the quarter wasn't entirely smooth, as sales of education solutions declined due to lower demand for supplemental curriculum products.
Looking ahead, some of the encouraging trends are expected to continue, with the company expecting the number of fairs to be in line with the previous guidance of 90,000 fairs in fiscal 2025. As a result, management reaffirmed the previous revenue guidance for fiscal 2025. Even better, full-year EBITDA guidance topped Wall Street's estimates. Overall, this was a strong quarter for the company.
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What The Market Is Telling Us
Scholastic’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. Moves this big are rare for Scholastic and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 2 months ago when the stock dropped 15.2% on the news that the company reported weak second quarter earnings results. Its revenue and EPS fell short of Wall Street's estimates. Revenue declined 10% due to resizing efforts (mostly affected Book Club revenue) to create a smaller, more profitable core business. In addition, the weakness was attributed to "lower supplemental curriculum product sales in Education Solutions and lower revenue per fair in the U.S. Book Fairs channel." Overall, this was a bad quarter for Scholastic.
Scholastic is down 14.6% since the beginning of the year, and at $32.54 per share, it is trading 21.6% below its 52-week high of $41.48 from December 2023. Investors who bought $1,000 worth of Scholastic’s shares 5 years ago would now be looking at an investment worth $868.43.
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