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New Oriental Education and Technology Group Inc.’s (EDU - Snapshot Report) third-quarter fiscal 2014 earnings of 30 cents a share beat the Zacks Consensus Estimate of 25 cents by 20%. Earnings climbed 36.5% year over year due to a solid top-line increase and improved profitability.

Revenue and Enrollments in Detail

Revenues of $254.4 million rose 16.4% from the year-ago levels due to increase in total enrollment. However, total enrollment increase was lower than expected, which led to revenues missing the Zacks Consensus Estimate of $268 million by 5.1%.

Total active enrollment of the largest private educational services provider in China increased 4.5% year over year to 602,900 students. Total enrollment was however lower than the company’s expectations due to three factors. Lower number of schools and a slow pace of new openings during the quarter adversely impacted total enrollment. As of Feb 28, 2014, the company had 700 schools and learning centers, down from 733 as of Feb 28, 2013. The enrollment levels were also impacted by softer business in adult English and domestic college English test preparation segments. Finally, the enrollment levels were impacted by a decline in enrollment in POP Kids programs, which target children aged 6 to 12.

Operating income went up 19.2% year over year to $36.0 million. Operating margin rose 40 basis points to 14.2% during the quarter.  As of Feb 28, 2014, New Oriental had cash and cash equivalents of $355.8 million compared with $420.6 million as of Nov 30, 2013.

Fourth Quarter Fiscal 2014 Outlook

For fourth quarter 2014, the company expects revenues in the range of $278.0 million to $287.6 million, representing 16% to 20% year-over-year increase.

New Oriental Education and Technology Group carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Better-ranked stocks worth considering in the education sector include DeVry Education Group Inc. (DV - Analyst Report), Apollo Education Group, Inc. (APOL - Analyst Report) and TAL Education Group (XRS - Snapshot Report). All the companies carry a Zacks Rank #2 (Buy).

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