Shares of Scholastic surged Monday after the publisher of the "Harry Potter" series and educational texts announced a share buyback plan which could add about 8 percent to fiscal 2008 earnings per share.
The New York-based company saw its stock hit a new 12-month high of $37.30 earlier, surpassing its prior peak of $37.08.
The company on Friday said it will buyback about 14 percent of its outstanding stock under a $200 million accelerated share repurchase agreement with Deutsche Bank.
Goldman Sachs analyst Peter P. Appert in a client note said the buyback will add about 20 cents per share to fiscal 2008 earnings, while debt levels will remain manageable considering the company's cash flow generation.
Wall Street expects the company to earn $2.49 per share in 2008, according to a poll by Thomson Financial.
"We like this move," wrote Appert, who has a "Neutral" rating and $31 target price on shares.
The company said it will pay for the buyback with a $200 million five-year amortizing term loan.
"That said, near-term we assume the company's focus will turn to paying down debt, so we do not anticipate additional share repurchases over the next 12 months," added Appert. "Improved operating fundamentals, particularly progress in boosting currently depressed operating margins, will be the next key metric in bolstering investor enthusiasm for these shares."