UTI's 52-Week Low: Is the Drop Justified?
On Aug 31, 2015, shares of Universal Technical Institute, Inc. UTI slumped to a 52-week low of $4.08. The company has seen its shares plunge 24.7% ever since it reported disappointing third-quarter 2015 results on Aug 6. Shares of Universal Technical eventually closed at $4.46 yesterday, resulting in a negative year-to-date return of 53.5%. well written
What Led to the Drop?
Universal Technical missed the Zacks Consensus Estimate on both counts during the third quarter of 2015, which also marked the company’s historically weakest quarter in a fiscal year.
Adjusted loss of 12 cents per share declined from the prior-year quarter earnings of a penny due to softer revenues. Revenues of $85.1 million decreased 6.8% due to lower enrollments partially offset by higher revenue per student. While total enrollment declined 8.7%, student starts were flat during the quarter. The company reported operating loss during the quarter owing to lower revenues, higher advertising expenses and costs related to the opening of the Long Beach, CA campus.
UTI’s enrollments have been weak for several quarters now due to macroeconomic headwinds, sluggish demand due to reluctance in taking loans and continued challenges in obtaining student financing, changing regulatory requirements, increased price sensitivity and affordability concerns, and increased competition. Though the company expects student starts to rebound in fourth-quarter 2015, its overall enrollment recovery is not as fast and smooth as it expected and the company will need more time for the rebound and eventual stabilization. Till then, Universal Technical is unlikely to impress investors.
Most of the estimates for this Zacks Rank #4 (Sell) company moved downward in the past 30 days. The Zacks Consensus Estimate for fiscal 2015 declined 30% to 7 cents per share over the same time frame.
Stocks to Consider
Some better-ranked stocks in the education industry include Strayer Education Inc. STRA, ITT Educational Services Inc. ESI, and New Oriental Education & Technology Group Inc. EDU. While Strayer Education sports a Zacks Rank #1 (Strong Buy), ITT Educational Services and New Oriental Education & Technology Group carry a Zacks Rank #2 (Buy).
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