On Dec 5, we issued an updated research report on Universal Technical Institute, Inc. (UTI Quick QuoteUTI - Free Report) – a leading provider of technical education training in the U.S.

The launch of new programs, campuses, improved marketing campaigns and the Financial Improvement Plan is doing the tricks for Universal Technical.

Moreover, the U.S. presidential election had a positive impact on the school industry as shares of for-profit education companies have rallied since the victory of Donald Trump. He had assured relaxed federal regulations for such companies during his campaigns. Universal Technical’s shares have gained over 55% in the last one month, outperforming 1.9% growth for the Zacks categorized School industry.
 

Also, Universal Technical recently reported 55.2% narrower loss than the Zacks Consensus Estimate in fourth-quarter fiscal 2016.

What’s Driving Universal Technical?

The Financial Improvement Plan is expected to lend the company financial stability and organizational alignment to tap in on opportunities. As per the plan, the company aims to generate higher operating income and EBITDA levels in 2017.

The plan, announced in Sep 2016, is expected to rake in $25–$30 million in annualized cost savings and record a severance charge of approximately $4 million in fiscal 2017.

To drive enrollments and return to profitability, the company is keen on opening smaller commuter friendly campuses that reduce the need for relocation by students. These smaller campuses aim to benefit student population that lives and works in close proximity to the campus. The company already has two such campuses in Dallas and Long Beach, which have proven accretive to earnings.

During the year, the company restructured the business to take out $30 million in annual expenses and raised $70 million in capital which the company believes will speed up the opening of smaller campuses.

Also, the company has shifted from its traditional advertising channels and is presently focusing on targeted audience through digital and local channels. Universal Technical’s plan is to draw quality prospective students at a lower cost. For 2017, it plans to reduce advertising expenses by 10%. The company expects its restructuring drive to generate annual savings of approximately $3.7 million in fiscal 2017.

Cause of Concern

Universal Technical’s enrollments have been sluggish for several quarters now due to changing attitude toward education and employment. It reported a 9% drop in average undergraduate full-time enrollments in fiscal 2016. Total starts declined 8.9% in fiscal 2016.

Universal Technical expects fiscal 2017 student starts to decrease in the low single-digit range. Average student population is also expected to be down in fiscal 2017.

Zacks Rank & Other Key Picks

Universal Technical carries a Zacks Rank #2 (Buy).

Other favorably ranked stocks in the school industry include TAL Education Group (TAL Quick QuoteTAL - Free Report) , Capella Education Company and DeVry Education Group Inc. (DV Quick QuoteDV - Free Report) .

TAL Education sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TAL Education’s earnings are expected to increase 0.8% in fiscal 2017.

DeVry – a Zacks Rank #2 stock – is expected to see a 5.7% increase in fiscal 2017 earnings.

Capella, also a Zacks Rank #2 company, is expected to witness 8.9% growth in full-year 2016 earnings.

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