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Adtalem (ATGE) Up 21% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Adtalem Global Education (ATGE). Shares have added about 21% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Adtalem 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.

Adtalem Q1 Earnings & Revenue Beat Estimates

Adtalem reported solid results for first-quarter fiscal 2021, wherein earnings and revenues surpassed the Zacks Consensus Estimate, as well as improved year over year.

For the quarter under review, adjusted earnings came in at 78 cents per share, which handily beat the consensus mark of 36 cents by 116.7%. The metric also increased 129% year over year.

Revenues & Operating Discussion

Revenues of $268.2 million beat the consensus mark by 4.7% and increased 5.4% year over year owing to enrollment growth at Chamberlain, as well as solid revenue improvement in Financial Services. For the fiscal first quarter, enrollment of new and total students grew 12.2% and 10.8% year over year, respectively.

Adjusted operating income from continuing operations of $54.4 million increased 97.7% year over year, given increased revenues across the organization, cost efficiencies and lower variable expenses.

Segment Details

Medical and Healthcare: Revenues in the segment grew 5.5% from the year-ago figure to $218.8 million.

In Chamberlain, revenues grew 14.8% year over year. New and total student enrollment for the September session increased 13.2% and 11.9% year over year, respectively.

Medical and Veterinary schools’ revenues decreased 6.5% year over year, mostly due to COVID-19-led reduced clinical weeks at the medical schools and the loss of housing revenues. Enrollment of new students grew 5.5%, while that of total students was up 4.3% year over year. Adjusted operating income in the segment was $53 million, up 85.2% from the prior-year level on strong enrollment trends at Chamberlain, lower campus-related variable costs and efficiency measures.

Financial Services: Revenues in the segment totaled $49.4 million, up 4.9% year over year, given higher revenues at OnCourse Learning. Revenues at Becker increased year over year due to growth in both CPA and continuing education program offerings. However, ACAMS revenues decreased from the prior-year quarter due to lower revenues from virtual conferences than in-person conferences. Adjusted operating income increased 111.5% from the prior-year quarter to $8.7 million.

Liquidity & Cash Flow

As of Sep 30, 2020, Adtalem had cash and cash equivalents of $561.2 million compared with $500.5 million at fiscal 2020-end. For the fiscal first quarter, cash provided by operating activities totaled $79.9 million compared with $47.5 million in the year-ago period.

Guidance

For fiscal 2021, Adtalem expects revenue growth of 5-7% and earnings per share from continuing operations (excluding special items) within 25-30%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Adtalem has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Adtalem has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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