While Amazon (AMZN) sucked up most of the air in book publishing circles this week, both Scholastic (SCHL) and McGraw-Hill (MHP) quietly posted encouraging earnings reports, with promising signs of good tidings over the next three months.
For its fourth quarter, which ended on May 31, Scholastic posted sales of of $538.4 million, up 9% from the same time a year ago. Consolidated earnings per diluted share were $0.79 in the quarter, compared to $0.76 in the prior year period. The company's children's publishing and distribution division's sales, up 6% to $273.5 million, ended up "outperforming the book publishing and book selling industry" thanks to money-making franchises like Suzanne Collins' Hunger Games books and the multiplatform series 39 Clues, spearheaded by bestselling author Rick Riordan.
For the full year, Scholastic recorded sales of $1.913 billion, up 3% from $1.849 billion a year ago.
"Having reduced overhead costs, strengthened our core children's book businesses and expanded our educational technology and services business in recent years, we achieved our long-term operating margin goal and further strengthened our balance sheet in fiscal 2010," said chairman, president and CEO Richard Robinson in a statement released Thursday morning. Looking ahead, Scholastic forecasts sales for the new fiscal year between $1.9 to $2 billion, and earnings per diluted share from continuing operations in the range of $1.95 to $2.20.
McGraw-Hill's Ups and Downs Average Out Well
As for McGraw-Hill, it reported second-quarter profits of $191.1 million, or 61 cents a share, a 16% jump from $164.1 million (and 52 cents a share) this time last year, and just what Wall Street had expected. Revenue went up 0.6% to $1.5 billion.
Revenue for the company's education side increased by 1.8% to $565 million, helped by foreign exchange rates that added $3.3 million in revenue and $2.3 million in operating profits. But K-12 market revenue went down 4% to $324.9 million due to a delay in shipping to Texas schools -- which adopted new textbooks faster than any other state -- and slowing sales in South Carolina, Indiana and especially California, all of which have been dogged by severe budget cuts at the state level. Also, the professional publishing division pointed to an expanding e-book market along with "indications of an improving trend in traditional retail channels."
On the financial services side, second-quarter revenue increased by 1.6% to $684.8 million while operating profit declined by 4.2% to $264.7 million, reflecting a pre-tax loss of $13.8 million from the divestiture of Vista Research and a pre-tax net benefit of $400,000 from restructuring charges. Standard & Poor's credit market services revenue was up only slightly, 0.1% to $457.9 million, while the investment services segment grew by 4.9% to $227 million. As for Information and Media, selling off BusinessWeek to Bloomberg helped drag down revenue by 5.1% to $224.2 million, though operating profit was way up by $33.1 million to $47.5 million.
"Solid results in the U.S. college and university market, a strong performance by Standard & Poor's indices, and strength in the global energy information market helped offset some softening in credit market services in the second quarter," said Chairman, President and CEO Harold McGraw III in a statement. Looking ahead, McGraw-Hill is cautious about its full-year earnings because of uncertain market conditions. "Our previous earnings per diluted share guidance for 2010 was $2.55 to $2.65," said McGraw. "Due to choppiness in some of our key markets, we now expect to finish the year at the low end of that range."
Why do investors make the decisions that they do?View Course »