Bull of the Day: New Oriental Education & Technology (EDU)
As a result of an excellent quarterly performance, estimates for this educational service provider have been on the uptrend sending the company to Zacks rank #1 (Strong Buy).
About the Company
Founded in 1993, New Oriental Education & Technology Group (EDU)is the largest provider of private educational services in China with over 15 million student enrollments. Headquartered in Beijing, EDU currently has a network of 57 schools, 733 learning centers, 32 bookstores and over 17,400 teachers in 50 cities. Additionally, it has a large online network with over 8.3 million users.
Excellent Quarterly Results
The company reported its quarter ended February 28, 2013 results on April 24, 2013. Total net revenues increased by 28.6% while the net income increased by 25.0% year-over-year.
Diluted net income came in at $0.18 per ADS, substantially ahead of Zacks consensus estimate of $0.11 per ADS. Further, top-line growth was well above the management guidance range of 22% to 27% growth.
The company expects year-over-year revenue growth to be in the range of 20% to 25% for the quarter ended May 31, 2013.
Estimates Revisions
As a result of strong results, Zacks consensus estimate for the quarter ended May 31 now stands at $0.15 per share, up from $0.13 per share, 60 days ago. The consensus estimate for the current year is also up to $0.82 per share, from $0.74 per share earlier.
Share Repurchases and Dividend
In April, the board of directors authorized the repurchase of up to $50 million of the company's shares during the period from April 29, 2013, through July 31, 2013.
During the quarterly conference call, the management indicated a strong possibility of a dividend payout after their fourth quarter (ended May 31) results.
The Bottom Line
EDU has a recognized brand name and a leadership position in areas like overseas test prep and overseas study consulting and K-12 after school tutoring in China. Private education industry in China has been growing strongly.
Further, strong commitment to reducing costs and improving operational efficiency has been driving margins higher. The company has also been closing its underperforming centers.
EDU is a Zacks Rank#1 (Strong Buy) stock. It also has a Zacks recommendation of “Outperform”. Further, Zacks industry rank of 75 out of 265 also indicates a strong possibility of outperformance in the short term.
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