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Will Universal Technical's (UTI) Varied Initiatives Pay Off?
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On Sep 5, we issued an updated research report on Universal Technical Institute, Inc. (UTI - Free Report) .
A leading provider of post-secondary education in the United States, Universal Technical Institute has been reporting dismal results for the last few quarters. The company has been incurring losses since the third quarter of 2015.
The company’s share price plunged 48.7% so far this year. Meanwhile, although earnings were better than expected, the company slashed its fiscal 2016 outlook for enrolments and sales that resulted in a 14% drop in share price following the release of its third-quarter results.
Universal Technical Institute expects fiscal 2016 student starts to decrease in the low double-digit range, compared to the prior guidance of low-to-mid single digits. Total enrollment is also anticipated to decline in the low double digits, comparing unfavorably with the prior guidance of mid-to-high single digits. Revenues are expected to decline about 6–7%, wider than the prior expectation of 3–5%.
Though the employment situation is improving, wages are still low. It will take some time for students to realize that better education and skills will improve their career in the years to come, compared to the low skill or no skill jobs that they are presently engaged in.
Meanwhile, other private education companies like DeVry Education Group Inc. (DV - Free Report) and Capella Education Company are also struggling to attain decent enrollment levels.
Management is of the opinion that the improvement in economy and job market is hurting demand for higher education and thereby enrollment trends of for-profit schools. The chief executive officer (CEO), Kim McWaters, also said that ‘’the negative news cycle against for-profit-schools’’ has resulted in lower student interest.
However, the company is undertaking several initiatives to drive its top line, including the launch of programs, campuses and improved marketing campaigns. During the third quarter of fiscal 2016, the company altered its advertising mix that will draw quality prospective students at a lower cost. Meanwhile, it has cut its quarterly advertising spend by 28% or $3.4 million year over year. The company expects this restructuring drive to generate annual savings of approximately $3.7 million in fiscal 2017.
While these initiatives should contribute to revenues in the future, it is not likely to happen any time soon.
Zacks Rank & Key Picks
Universal Technical Institute carries a Zacks Rank #3 (Hold). A better-ranked stock in the education industry is Lincoln Educational Services Corporation (LINC - Free Report) with a Zacks Rank #2 (Buy).
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Will Universal Technical's (UTI) Varied Initiatives Pay Off?
On Sep 5, we issued an updated research report on Universal Technical Institute, Inc. (UTI - Free Report) .
A leading provider of post-secondary education in the United States, Universal Technical Institute has been reporting dismal results for the last few quarters. The company has been incurring losses since the third quarter of 2015.
The company’s share price plunged 48.7% so far this year. Meanwhile, although earnings were better than expected, the company slashed its fiscal 2016 outlook for enrolments and sales that resulted in a 14% drop in share price following the release of its third-quarter results.
Universal Technical Institute expects fiscal 2016 student starts to decrease in the low double-digit range, compared to the prior guidance of low-to-mid single digits. Total enrollment is also anticipated to decline in the low double digits, comparing unfavorably with the prior guidance of mid-to-high single digits. Revenues are expected to decline about 6–7%, wider than the prior expectation of 3–5%.
Though the employment situation is improving, wages are still low. It will take some time for students to realize that better education and skills will improve their career in the years to come, compared to the low skill or no skill jobs that they are presently engaged in.
UNIVL TECH INST Price and Consensus
UNIVL TECH INST Price and Consensus | UNIVL TECH INST Quote
Meanwhile, other private education companies like DeVry Education Group Inc. (DV - Free Report) and Capella Education Company are also struggling to attain decent enrollment levels.
Management is of the opinion that the improvement in economy and job market is hurting demand for higher education and thereby enrollment trends of for-profit schools. The chief executive officer (CEO), Kim McWaters, also said that ‘’the negative news cycle against for-profit-schools’’ has resulted in lower student interest.
However, the company is undertaking several initiatives to drive its top line, including the launch of programs, campuses and improved marketing campaigns. During the third quarter of fiscal 2016, the company altered its advertising mix that will draw quality prospective students at a lower cost. Meanwhile, it has cut its quarterly advertising spend by 28% or $3.4 million year over year. The company expects this restructuring drive to generate annual savings of approximately $3.7 million in fiscal 2017.
While these initiatives should contribute to revenues in the future, it is not likely to happen any time soon.
Zacks Rank & Key Picks
Universal Technical Institute carries a Zacks Rank #3 (Hold). A better-ranked stock in the education industry is Lincoln Educational Services Corporation (LINC - Free Report) with a Zacks Rank #2 (Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>