A month has gone by since the last earnings report for Universal Technical Institute . Shares have added about 5.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Universal Technical 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.
Universal Technical Posts Wider-Than-Expected Q2 Loss
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.
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.
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.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 10% due to these changes.
At this time, Universal Technical has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Universal Technical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.