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Can Barnes & Noble Education Climb Higher?

By Dan Caplinger – Sep 6, 2016 at 1:05PM

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The educational content specialist has seen a big rebound in recent months, but will its quarterly results justify the upward move?

Image source: Barnes & Noble Education.

College in America is big business, and Barnes & Noble Education (BNED -17.84%) has sought to create a lucrative niche in serving college students across the country. With a captive audience of students, each college and university location offers an opportunity for Barnes & Noble Education, which operates campus bookstores and looks to offer its customers the textbooks, supplies, and sundries they need.

Coming into its fiscal first-quarter financial report on Thursday, most investors don't think B&N Education will be able to make money, but they hope to see ongoing progress that should reduce the flow of red ink over time. Let's look more closely at what's been happening with B&N Education and whether it can keep moving in the right direction going forward.

Stats on Barnes & Noble Education

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Data source: Yahoo! Finance.

What's coming up for Barnes & Noble Education earnings?

Over the past few months, investors haven't been certain about their views on B&N Education earnings. They've reduced their expectations for the July and October quarters by a penny per share, but they've made small boosts to their full-year fiscal 2017 and 2018 projections. The stock has responded positively, climbing 14% since early June.

B&N Education's fiscal fourth-quarter results helped to inspire optimism among shareholders. The company posted a 4.5% rise in comparable-store sales during the quarter, reversing what had been a downward trend in comps earlier in the year. Overall revenue climbed 8%, and B&N Education defied expectations for a small adjusted loss by posting adjusted earnings of $0.07 per share. Not only did the company benefit from a calendar effect that shifted some school-related textbook and course materials into the quarter, but B&N Education also said general merchandise revenue performed well, pointing to sales of graduation-related products and college logo apparel. Despite somewhat tepid guidance, B&N Education seemed to build some momentum coming into the summer months.

How Barnes & Noble Education is making progress

Already, B&N Education has made a huge amount of progress in winning new business and continuing its expansion plans. In mid-August, the company announced contract wins that brought its total for the just-started fiscal year to 18 new contracts. These relationships will put B&N Education into 34 new campus-located and online virtual bookstores, and the educational institutions serve in total more than 200,000 students and faculty members. Such growth has been a key part of B&N Education's overall strategy, with CEO Max Roberts noting that its student and faculty customers are "the vital core of our company's mission to deliver innovative and affordable educational content, competency-based education tools, and courseware solutions.

Another key driver of future growth is to make sure B&N Education keeps up with the transformation of the college experience into digital education. In August, B&N Education said it had extended its current relationship with OpenStax, a nonprofit entity that provides greater access to cost-effective, high-quality course materials and other digital solutions. By integrating OpenStax content through its LoudCloud learning analytics platform, B&N Education believes it can offer educators better tools that they can use to boost their students' performance and keep them at their institutions. Similarly, Barnes & Noble Education said in July that it had entered into a partnership with Instructure (INST), which is the cloud-computing company behind the Canvas learning management system. The partnership will integrate B&N Education's LoudCloud with Canvas, which both companies hope will enhance the value of each element of the platform and satisfy client institutions more fully.

In the B&N Education earnings report, investors should watch to see how well the company is doing in moving forward with new bookstore projects and agreements it has set up recently. If it can create a seamless transition for colleges and universities, then more potential customers might look at Barnes & Noble Education as a viable solution to meet their students' needs.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of Barnes and Noble Education. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

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