Markets

Adtalem Global's (ATGE) Cost Saving Strong, Enrollments Down

On Jun 9, we issued an updated research report on Adtalem Global Education Inc.ATGE , formerly known as DeVry Education Group Inc., is a leading global education provider.

The company's cost-saving initiatives, transformation strategy and stackable programs are encouraging. However, sluggish enrollment trends leading to lower revenues raise concerns.

Notably, Adtalem Global's shares have gained over 125% in the last one year, compared with the 68.2% rally of the Zacks categorized Schools industry. Adtalem Global beat earnings estimates in all of the past four quarters. Moreover, earnings estimates for the current year moved north by 1.1% over the past 60 days.

Pros

In order to counter the decline in profits and student enrollments, Adtalem Global undertook cost-saving initiatives like workforce reduction and curbing discretionary spending. The company is following a strict cost-control routine, with special emphasis on controlling costs. The company has brought down its expenses by $181 million in fiscal 2016 and expects to continue reducing expenses in fiscal 2017 as well.

The stackable programs, designed to provide students with enhanced flexibility and affordability, are likely to attract more students. Also, Adtalem Global has undertaken a transformation strategy for DeVry University which has been reporting weak enrollment numbers for a long time. The company's transformation strategy for the university includes the improvement of both student experience and affordability of programs along with marketing of DeVry University. It also reduced its costs significantly through disciplined expense management.

Cons

The company has been witnessing a persistent decline in enrollments at DeVry University, which accounts for a major portion of its revenues. DeVry University starts have been declining for several years now and are expected to remain a challenge over the near term, as prospective students are still reluctant to incur debt for higher degree. In Mar 2017, undergraduate new student enrollments declined 14.3%, while total students fell 20.9%.

As the employment situation is improving, more adult students are opting for jobs and the demand for academic programs has declined. There reflects reluctance among students to enroll in academic programs and take loans to fund them.

Zacks Rank & Stocks to Consider

Adtalem Global currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the industry are Bridgepoint Education, Inc. BPI , Bright Horizons Family Solutions Inc. BFAM and Grand Canyon Education, Inc. LOPE .

Bridgepoint Education sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Full-year 2017 earnings for Bridgepoint Education are expected to increase 263.9%.

Bright Horizons, a Zacks Rank #2 (Buy) stock, is expected to witness 20.7% growth in 2017 earnings.

Grand Canyon, also a Zacks Rank #2 stock, is expected to see a 15.1% rise in 2017 earnings.

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DeVry Education Group Inc. (ATGE): Free Stock Analysis Report

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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.


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

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