Adtalem Global Education Inc.’s ATGE transformation strategy and solid growth in Chamberlain are helping it boost enrollments. Amid intense competition in the school industry, the company posted better-than-expected earnings in the second quarter of fiscal 2019. In fact, it surpassed the Zacks Consensus Estimate in four out of the trailing five quarter.
Meanwhile, Adtalem’s shares have declined 3.3% in the past three months against its industry’s growth of 15.9%. Although share price of the company is not encouraging, its focus on new student enrollment growth through enhanced program offerings and cost-saving initiatives to achieve sustainable earnings growth will help it gain traction in the near future.
Let’s delve deeper into the factors that are driving this Zacks Rank #2 (Buy) company.
Investment Initiatives Bode Well: In order to boost student enrollments, Adtalem has laid out various initiatives in the past few quarters. Initially, the company emphasized more on collaborating with corporations, hospitals, government agencies and professional organizations to design education programs that are aimed at developing skills. These tie-ups enabled Adtalem to reduce its exposure to Title IV funding.
Additionally, the company is introducing short-term programs, which are directly aimed at meeting students’ preference and employers’ needs. In the fiscal second quarter, it witnessed new student enrollment growth of 4.9% and total student enrollment growth of 2.9% from the prior year. Moreover, such programs are expected to drive enrollments, which are likely to boost revenues.
Cost-Saving Methods: Over the past few quarters, Adtalem has been incurring increased costs due to the implementation of above-mentioned initiatives. To counter these costs, the company undertook strict cost-saving initiatives like workforce reduction and curbing discretionary spending. The company’s costs of educational services declined 7.2% in the first six months of fiscal 2019.
Robust Chamberlain Performance: Adtalem’s health care and international institutions, specifically Chamberlain, showed significant improvement in revenues as well as enrollment. In the January 2019 session, Chamberlain’s new student enrollment improved 6.4% from the year-ago period.
The university witnessed growing demand for nurses and increasing evolvement in the healthcare industry. Moreover, it remains optimistic about the rising demand in the Medical and Healthcare segment from students and employees.
Other Key Picks
Some other top-ranked stocks in the Zacks Schools industry are Career Education Corp. CECO, Lincoln Educational Services Corp. LINC and K12 Inc. LRN. While Career Education currently sports a Zacks Rank #1 (Strong Buy), Lincoln and K12 carry a Zacks Rank #2. You can the complete list of today’s Zacks #1 Rank stocks here.
Career Education is expected to record an EPS growth rate of 9.5% in the current year.
Lincoln has an expected earnings growth rate of 148.2% for 2019.
K12’s earnings are expected to increase 16.2% in fiscal 2018.
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