On Dec 26, we reiterated our Neutral recommendation on
Universal Technical Institute, Inc.
). The company's fourth-quarter fiscal 2013 earnings and revenues
missed the Zacks Consensus Estimate and the year-ago levels.
However, total student starts in the quarter exceeded the
NEW ORIENTAL ED (EDU): Free Stock Analysis
ITT EDUCATIONAL (ESI): Free Stock Analysis
UNIVL TECH INST (UTI): Free Stock Analysis
XUEDA EDUC-ADR (XUE): Free Stock Analysis
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Why the Reiteration?
A leading provider of post-secondary education in the United
States, Universal Technical reported fourth quarter 2013 results
on Dec 3, 2013.
Universal Technical's fourth-quarter fiscal 2013 earnings and
revenues lagged the Zacks Consensus Estimate by 30% and 1.2%,
respectively. Earnings declined 36.4% year over year due to a
5.4% decline in revenues and weak margins. The weakness in
revenue is due to a 6.4% decline in total enrollments.
However, new enrollment increased 9.5% in the fourth quarter,
which lies at the higher end of management's guidance of a mid-
to high-single digit increase. The increase in new enrollment was
driven by better quality of student enquiries in the fourth
quarter of 2013 and an additional business day in the quarter. It
was also driven by recovery in the automobile industry.
The recovery of the automobile industry increased the need for
trained technicians. The employment rates are improving and so
The company is striving to improve total student enrollment by
increasing the number of scholarships and making small increases
in tuition fee.
However, the company reduced its enrollment starts guidance for
the first quarter of 2014, as there is one less business day in
the quarter. The company expects new enrollment to decline in the
first quarter of 2014, compared to prior expectations of flat
results, which concerns us.
Other Stocks to Consider
Universal Technical holds a Zacks Rank #3 (Hold). Better-ranked
stocks in the education sector include
ITT Educational Services Inc.
New Oriental Education & Technology Group
Xueda Education Group
). While ITT Educational Services carries a Zacks Rank #1 (Strong
Buy), New Oriental Education & Technology Group and Xueda
Education Group hold a Zacks Rank #2 (Buy).