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Adtalem (ATGE) Up 15.5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Adtalem Global Education (ATGE - Free Report) . Shares have added about 15.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Adtalem due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Adtalem’s Q1 Earnings Beat Estimates, Revenues Miss

Adtalem Global Education posted mixed first-quarter fiscal 2019 results, with earnings surpassing analysts’ expectations and revenues missing the same. While adjusted earnings (excluding special items) of 45 cents beat the consensus mark of 41 cents by 9.8%, revenues of $284.2 million missed the same by 4%.

Adjusted earnings increased 9.8% on a year-over-year basis.

However, total revenues declined 3.1% from a year ago due to segmental decline in Professional Education, and Technology and Business segments.

Operating Highlights

Total operating costs and expenses rose 8.9% year over year to $286.7 million in the quarter. Adjusted operating income was $37 million, reflecting an increase of 19.4% from the prior-year quarter.

Segment Details

Medical and Healthcare:
In the fiscal first quarter, segmental revenues of $202.1 million rose 5.7% from the year-ago level on growth at Chamberlain University along with Medical and Veterinary schools.

Revenues from the Chamberlain University were flat with the year-ago quarter level of $113.7 million, owing to higher new as well as total student enrollment. New student enrollment increased 9.5% and total student count grew 4.1% in the September 2018 session.

Revenues from Medical and Veterinary schools jumped 14.3% year over year. New and total student enrollment increased 9.5% and 2.5%, respectively, in the September 2018 semester.

Adjusted operating income of the segment was $40.7 million, up 54.4% from the prior-year quarter.

Professional Education: The segment’s revenues of $35.6 million were down 11% year over year, primarily due to a planned shift to hold the Association of Certified Anti-Money Laundering Specialists (ACAMS) North American annual conference in the second quarter of fiscal 2019 instead of the first quarter of fiscal 2018.

Technology and Business: The segment recorded revenues of $47.3 million, down 24.3% year over year. The top line declined 4.2% on a constant-currency basis, primarily due to intensified competition and reduced government funding. New and total student enrollment increased 23.8% and 3.5%, respectively, on a year-over-year basis.

The company recorded adjusted operating loss of $2.7 million during the fiscal first quarter against income of $1.9 million a year ago.

Notably, under the Home Office and Other, adjusted operating loss was $5.7 million in the fiscal first quarter.

Liquidity & Cash Flow

As of Sep 30, 2018, Adtalem’s cash and equivalents were $408.8 million, down from $430.7 million on Jun 30, 2018. Cash flow provided by operating activities totaled $78 million at the end of fiscal first quarter, down from $90.3 million a year ago.

Fiscal Second-Quarter Guidance

Revenues are expected to grow 3-4% year over year. Adjusted operating costs are projected in the range of 5-6%.

Fiscal 2019 Guidance

Total revenues are now anticipated to grow 4% for the year. Adjusted earnings are likely to rise 2-3%. Capital spending is expected in the band of $70-$75 million. The effective income tax rate for the fiscal year is likely to be around 17-18%.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

At this time, Adtalem has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Adtalem has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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