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Universal Technical (UTI) Posts Wider-Than-Expected Q2 Loss

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Universal Technical Institute, Inc. reported second-quarter fiscal 2019 results, wherein a loss of 27 cents per share was wider than the Zacks Consensus Estimate of a loss of 17 cents. However, the reported loss was narrower than the year-ago loss of 40 cents.

The company’s quarterly revenues of $81.7 million marginally surpassed the consensus mark of $81.6 million. Moreover, the reported revenues increased 1.3% from the prior-year figure of $80.7 million, attributable to higher average full-time enrollment despite one less earning day. Total starts also improved 11.2% year over year to 2,022 students during the quarter.

Universal Technical Institute Inc Price, Consensus and EPS Surprise

Operating Highlights

Operating expenses declined 2.4% from the year-ago figure to $87.3 million, backed by lower compensation and related costs, along with reduced contract and professional services expense. The reduction was partially offset by one-time cost of $1.25 million associated with the divesture of its Norwood, MA campus and direct costs of $1.3 million related to the Bloomfield, NJ campus.

Adjusted operating loss came in at $4.2 million, narrower than a loss of $6.7 million recorded in the prior-year period. Notably, adjusted EBITDA totaled $0.8 million during the reported quarter, whereas adjusted EBITDA was a loss of $2.3 million in the year-ago period.

Financial Highlights

As of Mar 31, 2019, the company had cash and cash equivalents of $52.9 million compared with $58.1 million recorded at 2018-end.

Net cash provided by operations totaled $2.8 million in the first six months of fiscal 2019 versus net cash used in operations of $6.1 million in the comparable period of fiscal 2018. Adjusted free cash flow of $3 million improved significantly from the prior-year quarter.

Fiscal 2019 Guidance Reaffirmed

Universal Technical expects new student starts growth in mid-high single digits across existing campuses, including the new Bloomfield, NJ campus. The average student population is likely to rise in low-single digits.

Fiscal 2019 revenues are expected in the range of $322-$332 million. Operating expenses are projected in the range of $337-$347 million.

Universal Technical expects to incur operating loss between $10 million and $15 million. Moreover, adjusted operating loss is anticipated in the range of $6-$11 million.

Adjusted EBITDA is anticipated in the range of $9-$15 million. Capital expenditure for fiscal 2019 is likely to be between $6 million and $8 million.

Importantly, UTI expects the divesture of Norwood campus to improve annual pre-tax net income, EBITDA and cash flows going forward.

Zacks Rank & Key Picks

Currently, Universal Technical carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Schools industry are Strategic Education, Inc. (STRA - Free Report) , Bright Horizons Family Solutions Inc. (BFAM - Free Report) and Career Education Corporation (CECO - Free Report) . While Strategic Education sports a Zacks Rank #1 (Strong Buy), both Bright Horizons and Career Education carry a Zacks Rank #2 (Buy). You can the complete list of today’s Zacks #1 Rank stocks here.

Strategic Education is expected to record an EPS growth rate of 36.2% in the current year.

Bright Horizons has an expected earnings growth rate of 12.8% for 2019.

Career Education’s earnings per share are expected to increase 9.5% in fiscal 2018.

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