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Adtalem's (ATGE) Q1 Earnings Miss Estimates, Down Y/Y

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Adtalem Global Education Inc. (ATGE - Free Report) reported first-quarter fiscal 2020 results, with the top and the bottom line lagging the Zacks Consensus Estimate.

In the quarter under review, the company reported adjusted earnings of 34 cents per share, which missed the consensus mark of 46 cents per share by 26.1%. Earnings also declined 22.7% from a year ago quarter’s reported figure. Higher investments in marketing and student recruitment to boost enrollments and revenues have negatively impacted operating income as well as profits.

Owing to the recently-announced agreement to divest Adtalem Educacional do Brasil, which represents the entire Business and Law segment, the segment is reported under discontinued operations.

Revenues & Operating Discussion

Revenues of $254.6 million also lagged the consensus mark of $302.5 million by 15.8%. However, the figure increased 7.5% year over year. During the fiscal first quarter, enrollment of new students increased 2.3% and total students grew 0.4% year over year.

Adjusted operating income totaled $27.5 million compared with $36.2 million in the prior-year quarter.

Adtalem Global Education Inc. Price, Consensus and EPS Surprise



Segment Details

Medical and Healthcare: Revenues in the segment rose 2.7% from the year-ago quarter’s figure to $207.5 million. Chamberlain University’s revenues increased 2.5% year over year.

In the fiscal first quarter, new and total student enrollment increased 2.9% and 1.4% year over year, respectively, in Chamberlain. The upside was mainly driven by growth in Bachelor of Science in Nursing and graduate programs including Master of Social Work.

Medical and Veterinary schools’ revenues grew 2.9% year over year. New and total enrollment in the September session dipped 1.9% and 4.7% year over year, respectively.

Adjusted operating income during the quarter was $28.6 million, down 29.6% from the prior-year quarter’s level. The decline was caused by elevated marketing-related expenses and higher corporate allocation expenses.

Financial Services: Revenues in the segment totaled $47.1 million, up 32.2% year over year. Revenues at Becker increased 0.3% year on year and that of Association of Anti-Money Laundering Specialists rallied 37.4% from the year-ago quarter’s tally. However, adjusted operating income declined 13.5% from the prior-year quarter’s tally to $4.1 million.

Liquidity & Cash Flow

As of Sep 30, 2019, Adtalem had cash and cash equivalents of $121.1 million compared with $204.2 million on Jun 30, 2019. In the fiscal first quarter, cash provided by operating activities totaled $47.5 million, down from $78 million in prior-year quarter.

Fiscal 2020 Outlook

Total revenues are projected to increase 5-7% year over year. Moreover, adjusted earnings per share (EPS) are anticipated to rise 7-9% on a year-over-year basis. Capital spending is expected in the range of $45-$50 million. The effective income tax rate for the fiscal is expected in the range of 19-20%.

Zacks Rank & Key Picks

Currently, Adtalem currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Schools industry include Career Education Corporation CECO, New Oriental Education & Technology Group Inc EDU and Lincoln Educational Services Corporation LINC. Career and New Oriental sport a Zacks Rank #1 (Strong Buy), while Lincoln carries a Zacks Rank #2 (Buy).

Career has three-five year expected EPS growth rate of 15%.

New Oriental’s current year earnings are expected to rise 32.2%.

Lincoln has an impressive long-term earnings growth rate of 15%

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