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Universal Technical's Transformation Plan to Boost Growth
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After the successful completion of the Financial Improvement Plan in 2017, Universal Technical Institute, Inc. (UTI - Free Report) announced a multi-year Strategic Transformation Plan, to drive new student starts, completions and improve student success.
Transformation Plan Details
The plan, which is expected to be implemented over the next 12-18 months, will likely generate approximately $30 million of additional operating income in fiscal 2020. The company will start reaping benefits from the plan beginning fiscal 2010.
The Transformation Plan includes an incremental internal net investment of approximately $4 million for additional marketing campaigns and new resources in marketing, admissions and support services in fiscal 2018.
The company will seek the expertise of a consulting organization to help it realize market opportunity and boost growth.
Kim McWaters, Universal Technical’s president and chief executive officer, commented,” We believe the Plan will maximize Universal Technical’s market leadership position, differentiating us from existing and emerging sources of vocational education and better serve prospective students who are pursuing increasingly valuable technician trades."
Earlier, the company had a Financial Improvement Plan in place, which delivered annualized cost savings of $40 million in fiscal 2017. The plan lent the company financial stability and organizational alignment to tap in on opportunities.
Updated Guidance
Factoring in the investments associated with the Transformation Plan, the company updated its 2018 guidance for operating expenses and operating loss.
Operating expenses are expected in the $348-$353 million range (inclusive of approximately $4 million in consulting fees and $4 million for incremental marketing and internal resources). Previously, the company projected operating expenses in the band of $340-$345 million. Operating loss is anticipated between $28 million and $33 million, compared with the previous range of a loss of $20-$25 million.
The company maintained its guidance for revenues, student starts, average student population, EBITDA and capital expenditures. Universal Technical continues to expect revenues in the range of $310-$320 million. Student starts are expected to grow in the low-single digits and average student population is likely to be down in the mid-single digits. EBITDA is still expected to be negative, while capital expenditures are projected in the range of $24-$25 million.
Meanwhile, Universal Technical’s shares have lost 13% in the past year, underperforming 9.3% rally of the industry it belongs to. Moreover, loss estimates for the current year have widened in the last 60 days, limiting upside potential for the stock. Declining enrollment trends weighs on the stock’s performance. Nevertheless, the Strategic Transformation Plan along with other growth initiatives, like smaller campuses and program expansions are expected to boost growth.
Zacks Rank & Stocks to Consider
Universal Technical carries a Zacks Rank #3 (Hold).
American Public Education’s earnings are expected to increase 18.6% in 2018.
2018 earnings for Grand Canyon are expected to increase 18.7%.
AMC Networks is expected to witness 10.3% growth in 2018 earnings.
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Universal Technical's Transformation Plan to Boost Growth
After the successful completion of the Financial Improvement Plan in 2017, Universal Technical Institute, Inc. (UTI - Free Report) announced a multi-year Strategic Transformation Plan, to drive new student starts, completions and improve student success.
Transformation Plan Details
The plan, which is expected to be implemented over the next 12-18 months, will likely generate approximately $30 million of additional operating income in fiscal 2020. The company will start reaping benefits from the plan beginning fiscal 2010.
The Transformation Plan includes an incremental internal net investment of approximately $4 million for additional marketing campaigns and new resources in marketing, admissions and support services in fiscal 2018.
The company will seek the expertise of a consulting organization to help it realize market opportunity and boost growth.
Kim McWaters, Universal Technical’s president and chief executive officer, commented,” We believe the Plan will maximize Universal Technical’s market leadership position, differentiating us from existing and emerging sources of vocational education and better serve prospective students who are pursuing increasingly valuable technician trades."
Earlier, the company had a Financial Improvement Plan in place, which delivered annualized cost savings of $40 million in fiscal 2017. The plan lent the company financial stability and organizational alignment to tap in on opportunities.
Updated Guidance
Factoring in the investments associated with the Transformation Plan, the company updated its 2018 guidance for operating expenses and operating loss.
Operating expenses are expected in the $348-$353 million range (inclusive of approximately $4 million in consulting fees and $4 million for incremental marketing and internal resources). Previously, the company projected operating expenses in the band of $340-$345 million. Operating loss is anticipated between $28 million and $33 million, compared with the previous range of a loss of $20-$25 million.
The company maintained its guidance for revenues, student starts, average student population, EBITDA and capital expenditures. Universal Technical continues to expect revenues in the range of $310-$320 million. Student starts are expected to grow in the low-single digits and average student population is likely to be down in the mid-single digits. EBITDA is still expected to be negative, while capital expenditures are projected in the range of $24-$25 million.
Meanwhile, Universal Technical’s shares have lost 13% in the past year, underperforming 9.3% rally of the industry it belongs to. Moreover, loss estimates for the current year have widened in the last 60 days, limiting upside potential for the stock. Declining enrollment trends weighs on the stock’s performance. Nevertheless, the Strategic Transformation Plan along with other growth initiatives, like smaller campuses and program expansions are expected to boost growth.
Zacks Rank & Stocks to Consider
Universal Technical carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the Zacks Consumer Discretionary sector are American Public Education, Inc. (APEI - Free Report) , Grand Canyon Education, Inc.(LOPE - Free Report) and AMC Networks Inc. (AMCX - Free Report) .
American Public Education and Grand Canyon sport a Zacks Rank #1(Strong Buy), while AMC Networks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here
American Public Education’s earnings are expected to increase 18.6% in 2018.
2018 earnings for Grand Canyon are expected to increase 18.7%.
AMC Networks is expected to witness 10.3% growth in 2018 earnings.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>