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Adtalem's (ATGE) Q4 Earnings Beat Estimates, Enrollment Up

Zacks Equity Research

Adtalem Global Education Inc. ATGE reported better-than-expected results in the fourth quarter of fiscal 2019. Both the top and bottom lines not only topped the Zacks Consensus Estimate but also improved year over year.

Strong demand, employer partnerships and superior student outcomes were partially offset by top-line challenges faced by Adtalem in Brazil.

In the quarter under review, the company reported adjusted earnings of 97 cents, which surpassed the consensus mark of 96 cents per share by 1%. The said figure also grew 12.8% on a year-over-year basis.

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 & Operating Discussion

Revenues of $330.3 million beat the consensus mark of $327 million by 1% and increased 3.3% from the prior-year period. During the fiscal fourth quarter, enrollment of new students increased 2.2% and that of total students grew 4.2% year over year.

Adjusted operating income totaled $70.1 million, reflecting growth of 4.5% year over year. Following the sale of DeVry University and Carrington College during second-quarter fiscal 2019, the company incurred a pre-tax loss of $2.3 million during the reported quarter.

Segment Details

Medical and Healthcare: The segment’s revenues rose 5.2% from the year-ago period to $211.6 million. Chamberlain University’s revenues increased 6.9% from the year-ago level.

In the fiscal fourth quarter, new and total student enrollment grew 2.6% and 2.4%, respectively, from the year-ago period. The upside was mainly driven by growth in Bachelor of Science in Nursing and graduate programs. Particularly in the May session, new and total enrollment rose 2.6% and 1.8%, respectively. In the July session, new student enrollment fell 5% but total enrollment increased 2.3% from the prior-year period.

Medical and Veterinary schools’ revenues grew 3% year over year. New and total enrollment in the May session dipped 0.6% and 6% year over year, respectively.

Adjusted operating income during the quarter was $40.1 million, down 17% from the prior-year level. The decline resulted from elevated marketing-related expenses and a higher level of corporate allocation expense.

Financial Services: Revenues from the segment totaled $53.5 million, up 18.1% year over year. Revenues at Becker increased 8.4% and that of Association of Anti-Money Laundering Specialists climbed 26.8% from the year-ago quarter. Moreover, the segment’s adjusted operating income increased 23.3% from the prior-year period to $16 million.

Business and Law: The segment reported revenues of $66.1 million, down 11.1% year over year. On a constant-currency basis, the metric declined 3.7%, primarily due to higher scholarships and discounts to offset reductions in government financial aid funding.

During the quarter, the company registered adjusted operating profit of $15.3 million, up 2.4% from $14.9 million reported in the prior-year period, backed by reduction in back office and administrative costs.

Liquidity & Cash Flow

As of Jun 30, 2019, Adtalem had cash and equivalents of $299.4 million compared with $430.7 million on Jun 30, 2018. At the end of the fiscal 2019, cash provided by operating activities totaled $204.9 million, down from $239.2 million in the comparable year-ago period.

In fiscal 2019, the company repurchased approximately 5.31 million shares of common stock for $252.9 million, at an average purchase price of $47.65.

Fiscal 2019 Highlights

In the fiscal 2019, the company reported adjusted earnings of $2.82 per share, up 1.4% from the fiscal 2018 level. Revenues during the said period also grew 0.7% year over year to $1,239.7 million. In addition, adjusted operating income of $215.7 million rose 1.5% from the prior-year level.

Fiscal 2020 Guidance

Total revenues are projected to grow 5-7% from a year ago. Moreover, adjusted earnings per share are anticipated to grow 7-9% from the prior year. Capital spending is expected to be nearly $45-$50 million. The effective income tax rate for the fiscal year is likely to be within 17-18%.

Zacks Rank & Peer Releases

Adtalem, which share space with Bright Horizons Family Solutions Inc. BFAM in the Zacks Schools industry, currently carries a Zacks Rank #3 (Hold). You can the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Strategic Education, Inc. STRA reported second-quarter 2019 results, wherein earnings and revenues beat the Zacks Consensus Estimate by 8.2% and 1.7%, respectively. Also, the top and bottom lines increased 113.8% and 82.8%, respectively, from the year-ago quarter. The positive performance was mainly backed by strong top-line numbers across its segments, given higher enrollment.

American Public Education, Inc. APEI reported second-quarter 2019 results, wherein earnings met the Zacks Consensus Estimate, while revenues beat the same. However, both the top and bottom lines declined year over year due to lower contribution from both the segments. Adjusted earnings of 30 cents per share decreased 23.1% on a year-over-year basis. Total revenues of $70.6 million surpassed the consensus mark of $70 million by 0.8% but declined 3% from the year-ago period.

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