Earnings Preview: UTI - Analyst Blog

Universal Technical Institute Inc. ( UTI ), which provides professional automotive, diesel, collision repair, motorcycle and marine programs, is slated to report its fourth-quarter 2011 financial results after the bell on Tuesday, November 29. The current Zacks Consensus Estimate for the quarter is 28 cents a share. The Zacks Consensus estimates revenue at $111 million.

Third-Quarter 2011, a Synopsis

Universal Technical posted better-than-expected third-quarter 2011 results. The quarterly earnings of 27 cents a share topped the Zacks Consensus Estimate of 21 cents, and climbed 8% from 25 cents earned in the prior-year quarter.

Net revenue for the quarter climbed 1.3% to $108.9 million from the prior-year quarter, and came ahead of the Zacks Consensus Estimate of $105 million. The increase in revenue reflects a rise in tuition fees, partially offset by fall in average undergraduate full-time student enrollment.

Fourth-Quarter 2011 Consensus

The analysts polled by Zacks, expect Universal Technical to post fourth-quarter 2011 earnings of 28 cents a share. The current Zacks Consensus Estimate reflects a decline of 3.4% from the prior-year quarter. The estimates in the current Zacks Consensus for the quarter range from a low of 25 cents to a high of 33 cents.

Zacks Agreement & Magnitude

Of the 8 analysts following the stock, none moved up or down in the last 30 or 7 days, thereby keeping the Zacks Consensus Estimate unchanged at 28 cents.

Mixed Earnings Surprise History

With respect to earnings surprises, Universal Technical has topped as well as missed the Zacks Consensus Estimate over the last four quarters in the range of negative 25.6% to positive 28.6%. The average remains at positive 3.9%. This suggests that Universal Technical has beaten the Zacks Consensus Estimate by an average of 3.9% in the trailing four quarters.

Price Stats

Since its last earnings release on July 27, 2011, Universal Technical's market price has plunged 32.6% to $12.34 on November 23, 2011. During trading hours on November 23, the stock reached the day low of $12.28 and the day high of $13.00.

The stock price is within the range of the 52-week low-high range of $12.28 attained on November 23, 2011 and $22.50 achieved on January 3, 2011. Over the period from July 27, 2011 to November 23, 2011, the stock dropped to a low of $12.28 on November 23, 2011 and rose to a high of $18.91 on July 27, 2011.

Let's Conclude

Universal Technical is witnessing a fall in students' enrollment. After increasing 3.3% in the second quarter of 2011, the company informed that average undergraduate full-time student enrollment dropped 3.8% in the third quarter. Moreover, student starts for the quarter plummeted 32.5%. The company cautioned that enrollment of new students for the fourth quarter and fiscal 2011 will be below the prior-year periods, which would result in a low single-digit revenue growth for the year.

The regulation proposed by the Department of Education is weighing upon student enrollments.

The Department of Education proposed that an educational program could only qualify for Title IV funds, if it helps in achieving gainful employment, which includes the criteria of loan repayment rate and debt-to-income ratios. The company derives a major portion of its revenues from federal student financial aid programs, the Title IV programs. The education institutions are also under the scanner due to the rise in the default rate of student loans.

Currently, we have a long-term Underperform rating on the stock. However, Universal Technical, which competes with Corinthian Colleges Inc. ( COCO ), holds a Zacks #3 Rank that translates into a short-term Hold recommendation.

CORINTHIAN COL ( COCO ): Free Stock Analysis Report

UNIVL TECH INST ( UTI ): Free Stock Analysis Report

Zacks Investment Research

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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