Scholastic Corporation SCHL is navigating a pivotal transformation within its Education division as it aims for a return to growth by fiscal 2027. The company is reshaping the business through tighter product alignment, cost discipline and a refined go-to-market approach. Recent results suggest this shift is beginning to yield improvements, particularly in narrowing revenue declines and enhancing operating efficiency.
While third-quarter fiscal 2026 revenues for the Education segment declined 2% to $56.1 million, this marked a significant deceleration from the sharper declines seen earlier in the year.
Under the leadership of Jeff Mathews, the division has refined its go-to-market execution and streamlined its product portfolio to align more closely with district and school needs. One critical driver of this turnaround is the strategic focus on the science of reading. By aligning instructional programs with evidence-based literacy approaches, the company is closing gaps, even as school spending remains tight due to funding uncertainty.
The division has improved its cost structure and operating discipline, leading to better year-over-year profitability despite the lower top-line figures. The segment’s operating loss improved by $1.7 million in the third quarter compared to the previous year. This improved efficiency allows the company to remain resilient as it works to regain market share in supplemental curriculum and reading materials.
While supplemental curriculum accounts for only a quarter of revenues, the segment is bolstered by its teacher and family-focused business lines, which have outperformed pre-pandemic levels. These non-school channels represent a significant opportunity for expansion through modest investment in existing products.
Management expects performance to stabilize as the transformation takes hold. With a sales pipeline that has shown sequential improvement each quarter, the company is positioning itself to capture renewed market share as market conditions gradually recover.
What the Latest Metrics Say About Scholastic
Scholastic, which operates in the broader educational publishing and media space alongside companies such as Pearson plc PSO and John Wiley & Sons, Inc. WLY, has seen its shares surge 145.8% over the past year compared with the industry’s rise of 2.8%. Shares of Pearson and John Wiley & Sons have declined 15.2% and 10.2%, respectively, in the aforementioned period.
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From a valuation standpoint, Scholastic's forward 12-month price-to-sales ratio stands at 0.51, lower than the industry’s ratio of 0.77. Scholastic is trading at a discount to Pearson (with a forward 12-month P/S ratio of 1.67) and John Wiley & Sons (1.15).
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The Zacks Consensus Estimate for Scholastic's current fiscal-year sales implies a year-over-year decline of 0.1%, while the consensus EPS estimate calls for growth of 291.7%.
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Scholastic currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).