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Adtalem (ATGE) Q2 Earnings Lag, Stock Dips on Tepid FY22 View

·5 min read

Adtalem Global Education Inc.’s ATGE shares plunged more than 18% in the after-hours trading session on Feb 8, after it reported lackluster second-quarter fiscal 2022 results. The company’s earnings and revenues lagged their respective Zacks Consensus Estimate due to the pandemic-related challenges. Also, ATGE reduced its fiscal 2022 guidance for earnings and revenues due to the pending sale of the Financial Services segment and COVID-related headwinds associated with the Omicron variant.

On a year-over-year basis, revenues and earnings improved on the back of the acquisition of Walden and income tax benefits.

In this connection, Steve Beard, president and CEO of Adtalem, said, “Despite the continued near-term headwinds from the pandemic disproportionally impacting our post licensure nursing programs, we believe our strategic focus, significant scale, and the synergies of the recent Walden acquisition leave us uniquely well positioned to be the leader in helping employers across the healthcare industry meet their critical workforce talent needs. As a result, we are more excited than ever about the opportunities ahead.”

For the fiscal second quarter, the Financial Services segment was treated as discontinued operations.

Earnings & Revenues Discussion

Adjusted earnings of 75 cents per share missed the consensus mark of 96 cents by nearly 22% but increased almost 23% from 61 cents a year ago.

Adtalem Global Education Inc. Price, Consensus and EPS Surprise

Adtalem Global Education Inc. Price, Consensus and EPS Surprise
Adtalem Global Education Inc. Price, Consensus and EPS Surprise

Adtalem Global Education Inc. price-consensus-eps-surprise-chart | Adtalem Global Education Inc. Quote

Revenues totaled $371.2 million, lagging the consensus mark of $400 million by 7.2% but increasing 58.4% year over year driven by the Walden acquisition. For the fiscal second quarter, enrollment of new and total students dropped 12.5% and 6.1% year over year, respectively.

Adjusted operating income rose 70% from the prior-year quarter to $70.2 million.

Segment Details

Chamberlain: Revenues in the segment fell 2% from the year-ago figure to $139.1 million. Adjusted operating income also declined 20.6% from the prior-year quarter to $25.8 million, primarily due to increased marketing expense and higher costs associated with a return to in-person campus instruction.

New student enrollment for the November session decreased 0.5% and total student enrollment declined 2.1% from the prior-year level. The downside was primarily owing to COVID-related headwinds in Chamberlain’s post-licensure programs.

Walden: This segment generated revenues of $140.6 million. New and total student enrollment in the quarter decreased 18.3% and 9.1%, respectively, year over year due to COVID-related headwinds in Walden’s post-licensure nursing programs. Adjusted operating income came in at $32.4 million

Medical and Veterinary: Revenues in the segment were down 1% from the year-ago figure to $91.5 million. Total student enrollment declined 6.9% from the prior-year level. During the quarter, the segment did not witness any new enrollment. Nonetheless, adjusted operating income inched up 4.8% from the prior-year quarter to $19.7 million on lower expenses.

Liquidity & Cash Flow

As of Dec 31, 2021, Adtalem had cash and cash equivalents of $275.4 million compared with $476.4 million at fiscal 2021-end. Long-term debt was $1.6 billion, up from $1.07 billion at fiscal 2021-end. For the first six months of fiscal 2022, cash provided by operating activities totaled $1.09 million compared with $63.4 million in the year-ago period.

Fiscal 2022 Guidance Updated

Owing to the pending sale of the Financial Services segment and significant impact of COVID-19 headwinds associated with the Omicron variant, which will have a negative impact on future enrollment, Adtalem reduced its fiscal 2022 guidance.

For fiscal 2022, Adtalem now expects revenues within $1,350-$1,390 million compared with the $1,685-$1,735 million expected earlier. Adjusted earnings per share are now projected within $2.90-$3.10 versus $4.20-$4.45 anticipated earlier. In fiscal 2021, it reported revenues of $1,112.4 million and adjusted earnings of $2.98 per share.

Zacks Rank

Adtalem currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A Look at Some Recent Consumer Discretionary Releases

Leggett & Platt, Inc. LEG reported tepid earnings for third-quarter 2021. The top and bottom lines surpassed the Zacks Consensus Estimate. On a year-over-year basis, earnings declined despite revenue growth.

Despite strong raw material-related selling price and acquisitions, Leggett witnessed higher costs associated with supply chain issues, semiconductor and foam chemical shortages, labor constraints, and transportation challenges.

Hasbro, Inc. HAS reported impressive fourth-quarter fiscal 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The bottom line outpaced the consensus mark for the sixth straight quarter, while the top line beat the same for the third consecutive quarter.

Hasbro reported adjusted earnings of $1.21 per share, beating the Zacks Consensus Estimate of 89 cents. In the prior-year quarter, the company reported adjusted earnings of $1.27 per share.

Royal Caribbean Cruises Ltd. RCL reported fourth-quarter 2021 results, wherein earnings and revenues missed the Zacks Consensus Estimate. Both the metrics lagged the consensus mark for the third consecutive quarter.

Across Royal Caribbean’s five brands, nearly 1.3 million guests sailed in 2021. By 2021-end, 50 out of 61 ships returned to operations, representing more than 85% of its worldwide capacity. The company’s bookings improved sequentially in the fourth quarter.


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