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Adtalem (ATGE) to Report Q4 Earnings: What's in the Cards?

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Adtalem Global Education Inc. (ATGE - Free Report) is scheduled to report fourth-quarter fiscal 2018 results on Aug 16, after the closing bell. In the last reported quarter, the company’s earnings came in at 72 cents per share, beating the Zacks Consensus Estimate of 71 cents by 1.41%. In fact, the company surpassed estimates in three of the past four quarters. However, it missed the consensus mark by 37.5% in the last September quarter, resulting in an average negative surprise of 6.61% in the trailing four quarters.

Let's see how things are shaping up for this announcement.

Factors at Play

Adtalem has been recording a persistent decline in enrollments. The company’s total student enrollment fell 2.4% in the last reported quarter. That said, Adtalem laid out plans to ensure a balanced focus of investment initiatives to deliver direct returns to its shareholders. The company has been emphasizing on partnering with corporations, hospitals, government agencies and professional organizations to design education programs aimed at teaching new skills to employees. These initiatives are expected to fuel top-line growth of Adtalem.

For the fourth quarter, Adtalem expects revenue growth between 1% and 2% year over year. Revenue growth within Medical and Healthcare, and Professional Education segments is expected to be partially offset by revenue declines in U.S. Traditional Postsecondary, as well as Technology and Business segments.

Adtalem’s health care and international institutions have registered significant improvement in revenues and profitability since fiscal 2013. In particular, the health care institution, Chamberlain’s, new student enrollment remained solid in the March 2018 session, improving 4.3%. For fiscal 2018, the company expects mid-single digit new student enrollment growth at Chamberlain.

Meanwhile, in order to counter declining profits and student enrollments, Adtalem undertook cost-saving initiatives like workforce reduction, curbing discretionary spending along with restructuring initiatives. The company is following a strict cost-control routine, with special emphasis on controlling the escalating costs at some of its institutions. The company’s total operating cost and expenses decreased 5.3% in the first nine months of fiscal 2018, helping the company generate profit. Operating costs before special items in the to-be-reported quarter are expected to be flat to up 1% compared with the prior-year quarter.

Overall, for the fiscal fourth quarter, the Zacks Consensus Estimate for total revenues is pegged at $352.5 million, implying a 21.9% decline from the year-ago figure. However, the Zacks Consensus Estimate for earnings is pegged at 90 cents, reflecting a 15.4% year-over-year increase.

Quantitative Model Prediction

Our proven model does not show that Adtalem is likely to beat earnings estimates in the to-be-reported quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Adtalem has an Earnings ESP of +3.62% and a Zacks Rank #4 (Sell). It is to be noted that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revisions. You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

American Public Education, Inc. (APEI - Free Report) reported second-quarter 2018 earnings per share of 39 cents, beating the Zacks Consensus Estimate of 33 cents. The reported earnings also increased 69.6% from the year-ago profit of 23 cents owing to solid cost management.

Strategic Education, Inc. (STRA - Free Report) or SEI announced that Strayer Education, Inc. and Capella Education Company have completed the proposed merger deal to create SEI, a national leader in education innovation. Strayer Education came up with adjusted quarterly earnings of 87 cents per share, in line with the Zacks Consensus Estimate. Adjusted earnings grew 33.8% from 65 cents per share in the year-ago period.

Meanwhile, Capella Education’s adjusted earnings of $1.05 per share in the quarter surpassed the Zacks Consensus Estimate of $1.04. Earnings were 90 cents per share in the year-ago quarter. (Read more: Strategic Education Takes Shape, Q2 Earnings in Focus)

Universal Technical Institute, Inc. (UTI - Free Report) recently reported fiscal third-quarter 2018 results. Adjusted loss of 52 cents per share in the quarter was wider than the Zacks Consensus Estimate of 48 cents and the year-ago quarter’s 21 cents.

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