Adtalem (ATGE) Outpaces Industry YTD: More Upside Left?
Adtalem Global Education Inc. ATGE stock has gained 28.2% in the year-to-date period compared with the Zacks Schools industry’s rise of 20.2%. The company has been benefiting from strategic partnerships & innovation, and cost synergies.
This leading healthcare education provider has a long-term earnings growth rate of 15%, which highlights its inherent strength. The Zacks Consensus Estimates for fiscal 2024 has increased to $4.31 per share from $4.28 per share over past 30 days. This depicts analysts’ optimism regarding the stock growth potential.
Image Source: Zacks Investment Research
Let’s discuss the factors substantiating its Zacks Rank #2 (Buy).
Growth Catalysts
Cost-Saving Initiatives: Adtalem undertook cost-saving initiatives like workforce reduction, centralized operations and curbing discretionary spending through supply management to address increasing cost pressure. In fiscal 2023, the company Achieved two-year $60 million cost synergy program, resulting in substantial operational efficiencies and a more profitable business model. Its performance also reflects continued year-over-year margin expansion, driven by operational efficiencies and the realization of cost synergies. Operating margins increased 600 basis points (bps) year over year to 11.6% in fiscal 2023.
Moreover, the company has identified opportunities to invest in future growth, create durable operational leverage, position itself for sustainable student enrollment growth, enhance persistence, and further expand its margins.
Solid Healthcare Institutions: Adtalem’s healthcare and international institutions have significantly improved revenues and profitability since fiscal 2013. The U.S. healthcare sector is currently struggling with a significant talent shortage, posing a threat to care quality and exacerbating health disparities in communities nationwide. ATGE believes it has uniquely positioned itself as a scalable solution to address these challenges. The company's post-secondary programs, serving over 75,000 students and graduating more than 25,000 diverse students in 2023, are rigorous and tailored to meet the healthcare industry's workforce demands. The company expects demand for healthcare professionals to outpace supply in the future.
Collaboration & Innovation: The company emphasizes on partnering with corporations, hospitals, government agencies and professional organizations to design education programs aimed at teaching new skills to employees. During the fourth-quarter fiscal 2023, ATGE enhanced its in-house adaptive learning capabilities through a perpetual license agreement with Edapt Technologies. The platform uses proprietary data to allow students to learn at their own pace, both in the classroom and elsewhere.
The company has been actively testing and refining this adaptive learning tool at Chamberlain, involving more than 13,000 nursing students, and the results are quite promising. Furthermore, the company has identified several additional scenarios where adaptive learning tools can be applied effectively across its various institutions.
Long-Term Growth and Sustainability: The company remains steadfast in its focus on long-term sustainability and growth, continuously aligning its strategies with a forward-looking vision. On Jun 21, 2023, the company unveiled its long-term growth strategy and financial targets through fiscal 2026.
For fiscal 2024, the company expects revenues and adjusted earnings per share (EPS) to range between $1,460-$1,520 million and $4.20-$4.40, respectively. The growth rate of revenues and adjusted EPS for fiscal 2025 is anticipated to be in the 4-6% and 10-15% ranges, respectively. The same for fiscal 2026 is projected to fall between 5-8% and 13-18%, respectively.
Other Key Picks
Some other top-ranked stocks from the Zacks Consumer Discretionary sector are:
Royal Caribbean Cruises Ltd. RCL sports a Zacks Rank #1 (Strong Buy) at present. It has a trailing four-quarter earnings surprise of 28.5%, on average. The stock has surged 138.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS suggests growth of 54.5% and 180.3%, respectively, from the year-ago period’s levels.
Trip.com Group Limited TCOM currently flaunts a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 147.9%, on average. The stock has gained 59.7% in the past year.
The Zacks Consensus Estimate for Trip.com Group’s 2023 sales and EPS suggests increases of 104.9% and 537.9%, respectively, from the year-ago period’s levels.
OneSpaWorld Holdings Limited OSW carries a Zacks Rank #2 at present. It has a trailing four-quarter earnings surprise of 42.6%, on average. The stock has gained 30.4% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates growth of 44.5% and 117.9%, respectively, from the year-ago period’s levels.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
Adtalem Global Education Inc. (ATGE) : Free Stock Analysis Report
OneSpaWorld Holdings Limited (OSW) : Free Stock Analysis Report
Trip.com Group Limited Sponsored ADR (TCOM) : Free Stock Analysis Report
