Earnings estimates have fallen sharply for Scholastic (SCHL) following disappointing fiscal 2013 third quarter results and lower management guidance. It is a Zacks Rank #5 (Strong Sell) stock. Although shares have sold off since the third quarter report making valuation look a bit more attractive, investors may want to hold off on this stock until earnings momentum improves. Scholastic is the world’s largest publisher and distributor of children’s books. Scholastic delivered disappointing results for the third quarter of its fiscal 2013 on March 21. It reported a loss of -63 per share, which was well below the Zacks Consensus Estimate of -39 cents. It was also well below last year’s loss of -32 cents. Sales slid -19% to $380.5 million, missing the consensus of $384.0 million. It was the company’s third straight top-line miss. This quarter’s decline was driven mostly by the children’s book publishing & distribution segment, which saw sales plunge -30% due to a sharp drop in sales of The Hunger Games trilogy. Special Offer: Stock picks from Forbes Dividend Investor are up 15% since July. Average yield on buys is 5.8%. Click here now to try Forbes Dividend Investor free for 30 days. Management lowered its guidance for the remainder of 2013 following disappointing third quarter results, prompting analysts to revise their estimates significantly lower for both 2013 and 2014. This sent the stock to a Zacks Rank #5 (Strong Sell). The Zacks Consensus Estimate for 2013 is now $1.09, down from $1.53 just 30 days ago. The 2014 consensus has fallen from $2.35 to $2.20 over the same period. You can see the big decline in earnings estimates over the last several months in the company’s ‘Price & Consensus’ chart: Scholastic also carries a long-term ‘Underperform’ Zacks Recommendation. Shares of SCHL are down about -15% since the third quarter earnings release, bringing valuation down with it. The stock currently trades at 13x 12-month forward earnings, which is in-line with the industry median. But investors may want to wait to establish a position in the stock until earnings momentum turns around. While investors might want to avoid Scholastic for now, there are other stocks within the publishing/books industry that investors might want to consider based on their positive earnings momentum. John Wiley & Sons (JW.A) and Reed Elsevier (ENL) , for instance, both carry a Zacks Rank of 2 (Buy). Todd Bunton is the growth & income stock strategist for Zacks Investment Research and editor of the Income Plus Investor service.
Source: FULL ARTICLE at Forbes Latest