Scholastic and OMNOVA Solutions Down on Earnings Reports; Vale SA, Mosaic, and Wal-Mart in Spotlight

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Crude futures are up by over 1.5% now as investors cheer yesterday’s solid EIA inventory report and many look forward to the OPEC/Russia meeting in Algeria. If oil can rally above the resistance of $50 per barrel, the broader indexes would benefit from the more sustainable prices and the uptick in energy valuations.

Among the stocks traders are talking about this morning are Scholastic Corp (NASDAQ:SCHL), OMNOVA Solutions Inc. (NYSE:OMN), Vale SA (ADR) (NYSE:VALE), Mosaic Co (NYSE:MOS), and Wal-Mart Stores, Inc. (NYSE:WMT). Let’s take a closer look at the latest developments surrounding these stocks and analyze what the smart money investors we track think about the companies in question.

Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 740 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (see the details here).

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Scholastic Corp (NASDAQ:SCHL) reported a loss of $1.15 per share on revenue of $282.7 million for its fiscal first quarter, beating the bottom-line estimates by $0.02, but missing the top-line consensus forecast by $3.8 million. Given that most schools were not in session during the fiscal first quarter, the company’s loss is not surprising. To put the loss in perspective, Scholastic lost $1.46 per share from continuing operations in the prior year period. Scolastic Corp (NASDAQ:SCHL) affirmed its fiscal 2017 outlook for earnings per share excluding one-time items of $1.60 to $1.70 on revenue of $1.7 billion to $1.8 billion. The company also anticipates free cash flow of $40 million to $50 million for the same time period. Chuck Royce‘s Royce & Associates inched up its stake in Scholastic Corp (NASDAQ:SCHL) by 2% to over 2.1 million shares in the second quarter.

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OMNOVA Solutions Inc. (NYSE:OMN) also reported mixed earnings for its latest quarter (the company’s fiscal third quarter). Omnova earned $0.14 per share on revenue of $195.6 million during the quarter, versus estimates of earnings of $0.17 per share and revenue of $195.1 million. Adjusted segment operating profit margin rose to 11% versus 10.1% in the third quarter of fiscal 2015, and management successfully reduced the net debt to TTM adjusted EBITDA ratio to 3.5x from 3.8x a year ago. OMNOVA  remains on track to deliver noticeable growth in adjusted EPS for fiscal 2016, largely driven by margin expansion, cost reductions, and improved mix. The smart money was slightly more bullish on the company in the second quarter, as 10 funds from our database were long OMNOVA Solutions Inc. (NYSE:OMN) at the end of June, up by two funds from the previous quarter.

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On the next page, we find out why traders are talking about Vale SA, Mosaic Co, and Wal-Mart Stores.

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