Investing

Academic Publisher John Wiley & Sons Struggles Despite Recovery Effort

Joshua Enomoto

Published: June 20, 2023 6:55 am

Last Updated: June 20, 2023 11:17 am

Stymied by the COVID-19 disruption and elevated borrowing costs, academic publisher John Wiley & Sons (US:WLY) is attempting a recovery effort, in particular divesting its non-core business units. While the key announcement helped lift WLY stock at the end of last week, it also faces a long road to credibility.

What’s worse, options traders don’t appear confident in management’s new directive.

On June 15, Wiley reported results for its fourth quarter and fiscal year ended April 30, 2023. In the accompanying press release, management announced “…strategic actions that will focus Wiley on its leading global position in the development and application of new knowledge and drive greater profitability, growth, and value creation.”

Most notably, the company will divest “…non-core education businesses, including University Services (known as online program management), Wiley Edge (formerly Talent Development) and CrossKnowledge. These assets will be reported as ‘businesses held for sale’ starting in Q1 2024. In Q4 2023, Wiley divested its test prep and Advancement Courses lines in Academic.”

As recently as March, Wiley was busy launching new partnerships with some of academia’s most prestigious institutions via the Edge program, which sought to address labor market skill gaps.

In addition, the leadership team emphasized that Wiley will focus on its “strongest and most profitable businesses and large market opportunities” under its Research and Learning division.

Disappointing Print

While seemingly encouraging, the actual print left much to be desired. In Q4, GAAP revenue came in at $526 million, slipping 4% against the year-ago quarter. However, operating income improved 41% year-over-year to $82 million, while Wiley generated earnings per share of $1.22 (up 46 cents YOY).

For the full year, though, revenue fell 3% against the prior year to $2.02 billion. Operating income landed at $56 million, down $163 million YOY. Also, EPS clocked in at 31 cents (down $2.31 YOY).

Management describes fiscal 2024 as its “Transition Year” and expects the benefits to be realized in fiscal 2025 and 2026. It promised more details on the company’s investor day, which is not yet on the investor relations page.

Poor Sentiment

Options traders let their sentiment be known despite Friday’s 3.11% pop. On Fintel’s screener for unusual stock options volume, call volume reached 747 contracts against an open interest reading of 412. On the flipside, put volume hit 2,202 contracts against open interest of 2,328.

Unsurprisingly, overall options sentiment for WLY stock is poor. At time of writing, WLY’s put/call ratio stands at 1.37. Since puts generally represent bearish wagers, ratios greater than one indicate bearish sentiment.

Looking ahead, traders may have difficulty sparking confidence in the recovery effort. According to data from the Board of Governors of the Federal Reserve System, federal student loans expanded over eight-fold from Q3 2009 (past the end of the Great Recession) to Q1 2023. The U.S. Supreme Court is likely days away from a decision on the Biden administration’s student loan relief package, which will forgive up to $20,000 in federal student loans for most borrowers, is legal. If upheld, more than 14 million Americans are set to have all of their education borrowing forgiven.

Combined with elevated borrowing costs due to rising interest rates, WLY stock may face difficulties as prospective students rethink higher education.

This article originally appeared on Fintel