Why Shares of Houghton Mifflin Harcourt Surged Today

By Timothy GreenMarketsFool.com

What happened

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Shares of education services and content provider Houghton Mifflin Harcourt (NASDAQ: HMHC) jumped on Thursday after the company reported its first-quarter results. Revenue and earnings came in above analyst expectations, prompting investors to push the stock 9.4% higher as of 1:21 p.m. EDT.

So what

HMH reported first-quarter revenue of $222 million, up 8% year over year and well above the $196.9 million analysts were expecting. Billings were up 10% year over year to $184 million. The sales increase was driven by an increase in domestic education net sales and Heinemann professional publishing net sales, as well as other items.

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Image source: Houghton Mifflin Harcourt.

HMH posted a net loss of $121 million, down 27% year over year. EPS was a loss of $0.98, $0.10 higher than analysts were expecting. Higher revenue and decreases in both cost of sales and operating expenses boosted the bottom line.

HMH CEO Jack Lynch emphasized that 2017 would be a year of change:

Now what

HMH is engaged in a review and evaluation of its business, with plans to improve its operational efficiency and right-size its cost structure. The company expects to achieve between $70 million and $80 million in annualized cost savings by the end of 2018, although this will come with charges totaling $41 million to $45 million.

HMH CFO Joe Abbott painted a rosy long-term picture despite the company's current challenges:

Investors bought into the turnaround story on Thursday, but the company has a long road ahead of it.

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