A month has gone by since the last earnings report for Universal Technical Institute (UTI). Shares have added about 2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Universal Technical due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Universal Technical’s Q1 Loss Wider Than Expected
Universal Technical Institute, Inc. recently reported fiscal first-quarter 2019 results, wherein loss of 17 cents per share was wider than the Zacks Consensus Estimate of 11 cents. The reported loss also widened from the year-ago level.
Nevertheless, quarterly revenues of $83.1 million surpassed the consensus mark of $81.3 million by 2.2%. Moreover, revenues increased 2.3% from the prior-year quarter, attributable to additional earning day and higher average tuition. Total starts also rose 14.8% year over year to 1,511 during the quarter.
Operating expenses of $90.3 million grew 6.5% from a year ago due to $4.2 million rise in one-time transformation consultant termination cost. Rising student population at the Bloomfield campus contributed $1.6 million to the company’s direct costs.
Adjusted operating loss in the quarter was $3 million compared with $1.9 million in the prior-year period.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) declined 50% to $1.3 million from the prior-year figure of $2.6 million.
As of Dec 31, 2018, the company had cash and cash equivalents of $58.6 million compared with $58.1 million recorded in the corresponding period of last year.
Net cash provided by operations came in at $4.4 million in the fiscal first quarter compared with net cash used in operations of $2.6 million a year ago. Adjusted free cash flow of $5.6 million improved significantly from the prior-year quarter.
Reiterate Fiscal 2019 Outlook
Universal Technical expects mid-high single digit new student starts growth across its existing campuses, including the new Bloomfield, NJ campus. The average student population is likely to rise in low-single digits.
Fiscal 2019 revenues are expected in the range of $322-$332 million. Operating expenses are projected in the range of $337-$347 million.
Universal Technical expects to incur operating loss between $10 million and $15 million. Moreover, adjusted operating loss is anticipated in the range of $6-$11 million.
Adjusted EBITDA is anticipated in the range of $9-$15 million. Capital expenditure for fiscal 2019 is likely to be between $6 million and $8 million (versus $8-$10 million expected earlier).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 15% due to these changes.
At this time, Universal Technical has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Universal Technical has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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