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Houghton Mifflin Harcourt Co. Slumps on CEO Resignation

By Timothy Green – Updated Sep 23, 2016 at 3:56PM

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After a rough earnings report featuring slashed guidance, the CEO is being replaced.

Image source: Houghton Mifflin Harcourt.

What happened

Shares of educational content and services company Houghton Mifflin Harcourt (HMHC) tumbled on Friday following the announcement that President and CEO Linda K. Zecher had resigned. At 3:15 p.m. EDT, the stock was down about 12%.

So what?

News of Zecher's resignation comes less than two months after the company reported disappointing quarterly results. HMH missed analyst estimates by a wide margin on all fronts, and it dropped its guidance for billings by about $100 million, to a range of $1.525 billion to $1.595 billion. Including Friday's decline, shares of HMH are down nearly 41% over the past year.

HMHC Chart

HMHC data by YCharts.

Chairman of the Board Lawrence K. Fish gave little detail on the reasoning behind Zecher's resignation:

The Board decided this was a good time to begin a search for the next CEO, who will be charged with combining strengths across the Company to accelerate growth in the core business as well as in adjacent markets, while continuing a disciplined approach to spending.

While the search for a new CEO is under way, L. Gordon Crovitz, a member of the HMH board, will assume the role of interim CEO.

Now what?

HMH also provided updated guidance, stating that it expects full-year billings to be at or near the low end of the company's previously lowered guidance. It's not a stretch to assume that Zecher's resignation was the direct result of the board being disappointed with the company's performance this year. Whoever the board chooses as the new CEO will need to both regain investors' trust and fix whatever problems are hurting HMH's results.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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.

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