Bull of the Day: New Oriental Education & Technology (EDU) - Bull of the Day


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As a result of an excellent quarterly performance, estimates for this educational service provider have been on the uptrend sending the company back to Zacks rank #1 (Strong Buy).

About the Company

Founded in 1993,   New Oriental Education & Technology Group ( EDU )   is the largest provider of private educational services in China with about 17 million student enrollments.

Headquartered in Beijing, EDU currently has a network of 57 schools, 713 learning centers, 32 bookstores and over 16,200 teachers in 50 cities. Additional it has a large online network with over 8.3 million users. 

Excellent Quarterly Results

The company released their financial results for the first fiscal quarter ended August 31, 2013 on October 23, 2013. EDU experienced strong top-line growth with total net revenues increasing by 15.7% year-over-year. Net operating earnings were $0.81 per share, beating the Zacks Consensus Estimate of $0.78 per share.

Total student enrollments in academic subjects tutoring and test preparation courses increased by 2.3% year-over-year. Operating margin expanded by 470 basis points to 34.9%,

Strong Guidance

The management updated their guidance for the second fiscal quarter and the fiscal year 2014. They now expect year-over-year growth in total net revenue to be in the range of 22% to 27%.

For the full year, they maintained their revenue growth guidance (between 18% and 22%) but raised their operating margin target to a range of 16% to 17 from 15% to 16% earlier.

The management expects stronger revenue and enrollment growth during the second half of the fiscal year as winter and spring quarters are traditionally the peak season for K-12 after school tutoring business.

Estimates Revisions

As a result of strong results, Zacks consensus estimate for current fiscal year and the next fiscal year now stand at $1.27 per share and $1.64 per share up from $1.22 per share and $1.57 per share, 60 days ago. 

The Bottom Line

EDU has a recognized brand name and a leadership position in areas like overseas test prep and overseas study consulting and K-12 after school tutoring. Private education industry in China has been growing rapidly thanks mainly to rising incomes of the expanding middle class in the country.

Further the management's strong commitment to reducing costs and improving operational efficiency has been driving margins higher.  The company has also been closing its underperforming centers.

EDU is a Zacks Rank#1 (Strong Buy) stock. It also has a Zacks recommendation of "Outperform".  Further, Zacks industry rank of 113 out of 265 also indicates some possibility of outperformance in the short term.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas , Stocks

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