John Wiley & Sons-Why Wiley Stock Dropped 8% Today

Core Viewpoint - John Wiley & Sons reported mixed earnings for fiscal Q1 2025, with better-than-expected sales but disappointing earnings, leading to a significant drop in stock price [1][2]. Financial Performance - Analysts had forecasted adjusted earnings of $0.55 per share on sales of$ 387.4 million, but Wiley reported sales of $403.8 million and earnings of$ 0.47 per share [2]. - The reported profit of $0.47 was a non-GAAP figure; under GAAP, Wiley actually incurred a loss of$ 0.03 per share, although this was an improvement from a loss of $1.67 per share in the previous year [3]. - Overall sales declined by 10.5%, with the smallest division shrinking and the largest division only achieving 3% growth [4]. Business Segments - The research publications division experienced a solid 3% growth, while the academic courseware segment benefited from a 14% sales increase driven by generative artificial intelligence [3]. - The professional learning division, however, faced challenges, resulting in a 1% decline in sales [3]. Future Outlook - Wiley forecasts approximately 3% total sales growth for fiscal 2025, with both divisions expected to grow in the low single digits and research potentially growing in the mid-single digits [5]. - Adjusted earnings are projected to grow by about 23% to approximately$ 3.42 per share, exceeding Wall Street's expectations, and free cash flow is anticipated to increase by about 10% to $125 million [5]. Valuation Concerns - Despite the positive guidance, Wiley's stock is trading at a price-to-free cash flow ratio of nearly 19, which is considered expensive given the company's single-digit growth and significant net debt exceeding$ 800 million [6].