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Adtalem Confirms Talks With YDUQS Over Brazil Operations Sale

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Adtalem Global Education Inc. (ATGE - Free Report) confirmed active negotiations with the Brazilian for-profit education company YDUQS — formerly known as Estacio Participacoes SA — for potential sale of its operations in Brazil.

Adtalem’s Brazilian operation, Adtalem Educacional do Brasil, operates under the Business and Law segment.

While the company stated that there is no assurance of a binding agreement, YDUQS is confident about the deal.

Reasons for Sale

The company has been facing challenges in Brazil over the past few quarters, which have been marring the top line. Revenues in the Business and Law segment, which comprises solely Adtalem Brazil, contributed 18.2% to total revenues in fiscal 2019. However, Adtalem Brazil’s revenues fell 16.6% in fiscal 2019. The downside was caused by drop in Brazilian Real’s value compared with the U.S. dollar. On a constant-currency basis, revenues fell 3.1% in fiscal 2019.

Intense competition along with higher discounts to offset reductions in government financial aid funding led to the decline.

Lower enrollment growth and pricing pressure in the education sector stemming from challenging economic conditions in Brazil have been concerns for Adtalem.

Other Factors Affecting Growth

Shares of Adtalem have declined 22.8% so far this year against the industry’s 30.6% growth. The Zacks Consensus Estimate for earnings has dropped 1.6% in the past 60 days, which indicates concerns related to the company’s prospects.



Adtalem’s bottom line has been under pressure due to certain restructuring charges related to the impairment of land, buildings and equipment at the Dominica campus of RUSM. Also, severance related to workforce reductions in Dominica is another factor. In fiscal 2019, the company reported restructuring-related expenses of $55.9 million, which was 4.5% of total revenues compared with 0.4% in fiscal 2018. Also, higher marketing-related expenses are exerting pressure on profits. The company expects to incur more expenses related to marketing in the first half of fiscal 2020 compared with the second half of fiscal 2019 levels

Zacks Rank & Stocks to Consider

Adtalem currently carries a Zacks rank #4 (Sell).

Some better-ranked stocks in the same space are Career Education Corporation (CECO - Free Report) , Laureate Education, Inc (LAUR - Free Report) and Lincoln Educational Services Corporation (LINC - Free Report) . While Career Education sports a Zacks Rank #1 (Strong Buy), Laureate Education and Lincoln Educational Services hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Career Education, Laureate Education and Lincoln Educational Services have three-five year expected earnings per share growth rate of 15%, 12% and 15%, respectively.

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