Why Barnes & Noble Education Inc Stock Jumped on Tuesday

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What's happening

Shares of Barnes & Noble Education, Inc. (NYSE: BNED) are surging, rising about 25% as of 11 a.m. EST on Tuesday. The company's fiscal second-quarter earnings report topped the consensus analyst estimate on the top and bottom lines, helped by recent acquisitions.

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So what

Barnes & Noble Education reported that consolidated sales grew to $886.9 million during its busy back-to-school quarter, up 15.1% from the prior-year period. Earnings rose to $1.03 per share for the quarter, higher than the consensus analyst estimate of $0.91 per share.

Acquisitions helped fuel sales and profit growth this quarter. In February, Barnes & Noble Education acquired MBS Textbook Exchange, one of the largest operators of digital bookstores and wholesale distributors of textbooks in the United States. In August, it acquired Student Brands, a portfolio of websites that includes Cram.com and Cite.com, which help students study for tests and properly cite research papers.

These acquisitions are helping paper over a decline in the physical-book business, which operates under the Barnes & Noble College Booksellers brand. This quarter, same-store sales in its legacy business declined about 4.4% year over year, driven by a 5% decrease in textbook sales.

Now what

The company's guidance for the full fiscal year 2018 calls for same-store sales at its brick-and-mortar unit to decline "in the low- to mid-single-digit percentage point range" compared to the year-ago period. It anticipates that adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will land between $105 million and $120 million for the full fiscal year, up from $78.3 million in fiscal 2017. The company said it intends to spend about $50 million on capital expenditures, driven primarily by its plan to open new brick-and-mortar bookstores.

The fiscal second-quarter back-to-school period is Barnes & Noble Education's busiest season. Investors will want to see that the company can carry momentum into the fiscal third quarter, when college students head back to bookstores to purchase their second-semester materials.

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Jordan Wathen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.