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 (
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%,
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
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.
NEW ORIENTAL ED (EDU): Free Stock Analysis
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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
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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