A month has gone by since the last earnings report for Adtalem Global Education (ATGE). Shares have lost about 21.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Adtalem due for a breakout? 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 drivers.
Adtalem Q4 Earnings & Revenue Miss, Down Y/Y
Adtalem Global Education Inc. reported lackluster results for fourth-quarter fiscal 2020, wherein earnings and revenues lagged the Zacks Consensus Estimate as well as declined year over year.
Despite being confident about long-term revenue and earnings growth, it did not provide its guidance for fiscal 2021 owing to uncertain economic conditions.
For the quarter under review, adjusted earnings came in at 58 cents per share, which missed the consensus mark of 61 cents by 4.9%. The metric also declined 12.1% year over year.
Revenues & Operating Discussion
Revenues of $259.7 million lagged the consensus mark of $260.4 million by 0.3% and decreased 1.7% year over year due to COVID-19 impacts. During the fiscal fourth quarter, enrollment of new and total students grew 5.9% and 6.9% year over year, respectively.
Adjusted operating income from continuing operations of $40 million decreased 23.2% year over year.
Medical and Healthcare: Revenues in the segment slipped 0.1% from the year-ago figure to $211.4 million. In Chamberlain, revenues grew 9.1% year over year. New and total student enrollment for the May session increased 5.4% and 8.2% year over year, respectively.
Medical and Veterinary schools’ revenues decreased 12.9% 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 9.7%, while total students fell 0.7% year over year. Adjusted operating income in the segment was $40 million, down 0.3% from the prior-year level.
Financial Services: Revenues in the segment totaled $48.3 million, down 9.7% year over year, given cancellation of ACAMS in person conferences and lower contribution from Becker Accounting. Revenues at Becker decreased 14.4% year over year due to the delay of CPA testing owing to the COVID-19 pandemic and constrained customer spending. OnCourse Learning contributed 10.1% to total revenues. However, revenues were impacted by the sale of Becker’s healthcare assets. Adjusted operating income declined 46.9% from the prior-year quarter to $8.5 million
Liquidity & Cash Flow
As of Jun 30, 2020, Adtalem had cash and cash equivalents of $500.5 million compared with $204.2 million at fiscal 2019-end. In fiscal 2020, cash provided by operating activities totaled $107.7 million compared with $204.9 million in the year-ago period.
Fiscal 2020 Highlights
Adjusted earnings of $2.28 fell just 0.4% from the fiscal 2019 level. Revenues for fiscal 2020 rose 3.8% from the prior year to $1.05 billion. However, adjusted operating income fell 9.1% year over year to $166.1 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
Currently, Adtalem has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. It's no surprise Adtalem has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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