Results: New Oriental Education & Technology Group Inc. Beat Earnings Expectations And Analysts Now Have New Forecasts
New Oriental Education & Technology Group Inc. (NYSE:EDU) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. Revenues were US$888m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.33, an impressive 33% ahead of estimates. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
See our latest analysis for New Oriental Education & Technology Group
Taking into account the latest results, the consensus forecast from New Oriental Education & Technology Group's 28 analysts is for revenues of US$4.23b in 2021, which would reflect a notable 18% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to increase 7.2% to US$2.55. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$4.23b and earnings per share (EPS) of US$3.10 in 2021. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
The consensus price target held steady at US$201, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on New Oriental Education & Technology Group, with the most bullish analyst valuing it at US$225 and the most bearish at US$179 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Of course, another way to look at these forecasts is to place them into context against the industry itself. Next year brings more of the same, according to the analysts, with revenue forecast to grow 18%, in line with its 21% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 24% per year. So it's pretty clear that New Oriental Education & Technology Group is expected to grow slower than similar companies in the same industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that New Oriental Education & Technology Group's revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$201, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on New Oriental Education & Technology Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple New Oriental Education & Technology Group analysts - going out to 2025, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for New Oriental Education & Technology Group you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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