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Lincoln (LINC) Q3 Earnings Miss Estimates, Increase Y/Y

Zacks Equity Research

Lincoln Educational Services Corporation’s LINC shares fell 4% on Nov 14, following lower-than-expected earnings in third-quarter 2019. However, its revenues marginally outpaced analysts’ expectation. Nevertheless, both the metrics improved year over year owing to 3.3% increase in average student population, which was mainly attributed to the company’s consistent student start growth over the past two years.

Delving Deeper

During the quarter under review, Lincoln reported adjusted earnings of 5 cents per share, missing the Zacks Consensus Estimate of 9 cents by 44.4%. However, the reported figure increased 150% on a year-over-year basis.

Total revenues during the quarter totaled $72.6 million, which topped the consensus mark of $72.34 million by 0.4% and grew 3.6% from the year-ago period. Revenues on a same school basis rose 4.8% from the year-ago period.

Lincoln Educational Services Corporation Price, Consensus and EPS Surprise

Lincoln Educational Services Corporation Price, Consensus and EPS Surprise

Lincoln Educational Services Corporation price-consensus-eps-surprise-chart | Lincoln Educational Services Corporation Quote

Average student population and total student starts increased 3.3% and 2.7% year over year, respectively. Same school average student population and starts grew 4.5% and 3.4% from the prior-year period, respectively. The strong results were mainly supported by continued focus on strategic operating plan, targeted marketing, expanding corporate partnerships and engagement with local communities.

Segment Details

Transportation and Skilled Trades’ revenues of $52.65 million grew 3.2% from the year-ago period. Total starts grew 0.2% from the year-ago quarter to 3,398. Average population also improved 2.4% from the prior-year quarter to 7,635. EBITDA during the quarter came in at $8.5 million, up from $8.2 million reported a year ago.

At the Healthcare and Other Professions (“HOPS”) segment, revenues increased 9.3% year over year to $19.9 million. Total starts in HCN rose 12.1% from the prior-year quarter to 1,381. Average population increased 9.1% from the prior-year quarter to 3,619. EBITDA in the segment was $1.5 million compared with $0.9 million reported in the prior-year period.

However, no revenues were generated from the Transitional segment (which refers to businesses that have been taught out) during the reported period.

Operating Highlights

Total costs and expenses during the quarter increased 0.6% year over year. Educational services and facilities expenses, as a percentage of revenues, decreased 200 basis points (bps) to 45.7%. However, selling, general and administrative expenses — as a percentage of revenues — increased 10 bps. EBITDA during the reported quarter grew 89.4% from the prior-year quarter to $4.1 million.

Financials

As of Sep 30, 2019, the company had total cash and cash equivalents of $11.8 million compared with $17.6 million at the end of 2018. Cash used in operations was $4.9 million in the quarter, down from $5.8 million reported in the prior-year period.

As of Sep 30, 2019, the company had 22 campuses compared with 23 in the comparable year-ago period.

2019 Guidance Reiterated

Revenue and student starts, excluding the Transitional segment, are expected to rise 3-5% year over year. Net income and EBITDA are estimated to be approximately $2 million and $12 million, respectively.

Zacks Rank & Peer Releases

Lincoln 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. or SEI STRA reported solid results in third-quarter 2019. The company’s earnings and revenues not only topped analysts’ expectations but also grew from the year-ago level. The positive performance was mainly backed by strong top-line numbers across its segments, given higher enrollment.

Adtalem Global Education Inc. ATGE reported first-quarter fiscal 2020 results, with the top and bottom lines lagging the Zacks Consensus Estimate. On a year-over-year basis, earnings declined 22.7% due to higher investments in marketing and student recruitment to boost enrollments and revenues, which in turn negatively impacted operating income as well as profits.

American Public Education, Inc. APEI reported better-than-expected results in third-quarter 2019. Both the top and bottom lines outpaced the Zacks Consensus Estimate. However, both the metrics declined year over year due to lower contribution from its segments.

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