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Why Scholastic Shares Tumbled

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Scholastic (NASDAQ: SCHL  ) were sliding again today, falling as much as 10% after the company posted another disappointing earnings report.

So what: The children's publishing house said revenue slid 25%, to $506.9 million, as sales fell off from the hit trilogy The Hunger Games, a major revenue stream since it debuted. Earnings per share from continuing operations, meanwhile, came in at $0.76 per share, down from $1.86 a year ago. Both results were below the mark set by the one analyst covering Scholastic. The company, which once had a lock on children's education and media, has been struggling to shift into the digital age, as investments in e-books and other online portals has weighed on profits.

Now what: Like the publishing industry in general, Scholastic is struggling to maintain its relevance, as the advent of electronic media has turned the industry upside down. The company can't count on blockbusters like The Hunger Games every year, but management said it expects to improve profitability in the next fiscal year with the introduction of a number of education technology products, and projects an EPS from continuing operations between $1.40 and $1.80, excluding items. Those numbers aren't terrible, but I'd wait to see consistent revenue and profits before getting on board.

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9/29/2016 11:03 AM
SCHL $38.23 Down -0.01 -0.03%
Scholastic CAPS Rating: No stars