Bright Horizons (BFAM) to Post Q4 Earnings: What's in Store?

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Bright Horizons Family Solutions Inc. BFAM is all set to report fourth-quarter 2018 results on Feb 12, 2019. The stock has a strong record o f earnings surprises, having surpassed the Zacks Consensus Estimate in seven of the trailing eight quarters. Meanwhile, in the third quarter, this leading provider of high-quality child care, early education and other services reported EPS of 73 cents per share, in line with the consensus mark. The company's top and bottom lines grew 9% and 18%, respectively, owing to gains across all the three segments.

How are Estimates Faring?

Let's take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release. The Zacks Consensus Estimate for the quarter to be reported is currently pegged at 84 cents, remaining stable over the past 30 days. Nevertheless, this reflects an increase of 15.1% from the year-ago earnings of 73 cents per share. Revenues are expected to be $478.2 million, up 8.7% year over year.

Bright Horizons Family Solutions Inc. Price and EPS Surprise

Bright Horizons Family Solutions Inc. Price and EPS Surprise | Bright Horizons Family Solutions Inc. Quote

Meanwhile, Bright Horizons, which shares space with K12 Inc. LRN , Adtalem Global Education Inc. ATGE and Strategic Education, Inc. STRA , has outperformed its industry over the past six months.

Factors at Play

Bright Horizons' fourth quarter is likely to benefit from enrollment gains in newer and full-service centers, strong contributions from its backup and Educational Advising segments, along with operating efficiencies owing to investments in marketing and technology.

The company's biggest revenue contributing segment - Full Service Center-Based Child Care (accounting for 82.1% of total third-quarter revenues) - should deliver better numbers in the to-be-reported quarter, given enrollment gains courtesy of increasing full-service centers, acquisitions and operating efficiencies from investments. With respect to marketing and technology investments, Bright Horizons has been pursuing various programs to speed up and improve customer experience. Courtesy of these positive factors, the segment's revenues advanced 9% in the first nine months of 2018.

Meanwhile, synergistic acquisitions have been an integral part of the company's growth strategy. As of Sep 30, 2018, Bright Horizons acquired five centers in the Netherlands, six in the United States and 17 in the United Kingdom through five separate business acquisitions. This is expected to contribute to top-line growth in the quarter to be reported.

The company has been prudently managing costs, delivering solid margin expansion. In the las t report ed quarter, adjusted EBITDA increased 11% and adjusted income from operations grew 14% from the year-ago level, primarily due to expanded gross profit.

However, investments in marketing and technology to support customer experience, service delivery, as well as operating efficiency are pressing concerns. Also, costs incurred during the pre-opening and ramp-up phase of newer lease/consortium centers have been compressing its margins to some extent.

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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 , Business , Earnings , Stocks
Referenced Symbols: BFAM , LRN , STRA , ATGE

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