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Why Is Adtalem Global (ATGE) Up 4.6% Since Its Last Earnings Report?

A month has gone by since the last earnings report for Adtalem Global Education Inc.ATGE . Shares have added about 4.6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ATGE due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Second-quarter fiscal 2018 results

Adtalem Global reported second-quarter fiscal 2018 results, with earnings surpassing the Zacks Consensus Estimate but revenues missing the same.

Adjusted earnings of 76 cents per share beat the Zacks Consensus Estimate of 75 cents by 1.3%. On a year-over-year basis, earnings increased 18.8%.

Quarterly net sales of $337.2 million missed the Zacks Consensus Estimate of $434.9 million by 22.5%. Total revenues however increased 1% from the year-ago figure. Total students enrollments increased 2.4% and new students enrollments rose 7.3%.

The company's total operating cost and expenses contracted 16% year over year to $281.9 million in the quarter. Operating income was $55.4 million in the quarter, against a loss of $1.5 million in the prior-year quarter.

Segment Details

Medical and Healthcare : This segment, which includes Chamberlain University, American University of the Caribbean School of Medicine, Ross University School of Medicine and Ross University School of Veterinary Medicine, is the largest contributor to revenues and earnings.

In the fiscal second quarter, segmental revenues of $ 203.3 million increased 0.9% from the year-ago level. Growth at Chamberlain University was offset by lower revenues at the medical and veterinary schools.

At Chamberlain, revenues rose 1.9%. Last November, new student enrollment increased 5.5% and total student count grew 5.1%.

Revenues from the medical and veterinary schools dropped 0.3% year over year.

Operating income at the segment was $55 million, up 5.6% from the prior-year quarter.

Professional Education : The segment includes Becker and Association of Certified Anti Money Laundering Specialists or ACAMS along with DeVry Education of Brazil.

The segment registered revenues of $30.4 million, up 10.9% year over year, primarily driven by 62% revenue growth at ACAMS.

Operating income was $2.2 million, higher than $0.1 million recorded in the prior-year quarter.

Technology and Business : This segment, comprising Adtalem Brazil Institution, registered revenues of $75.1 million, up 2.4% year over year.

This segment generated operating income of $14 million up 3.8% year over year. The improvement was driven by revenue growth and cost efficiencies.

US Traditional Postsecondary : The segment registered revenues of $29 million, down 10.5% year over year. Carrington's revenues dropped 13.1% to $32.1 million.

This division incurred an operating loss (adjusted for special item) of $5.8 million compared with a loss of $6.3 million a year ago.

New student enrollment at Carrington was up 7.2%, courtesy of the college's efforts to revise the institution's program offerings and marketing efforts.

Q3 Guidance

Revenues are expected to increase 3% to 4% year over year.

Operating costs (before special items) are expected to rise 1% to 2% year over year.

Fiscal 2018 Guidance

The company expects earnings per share growth of 10-12% (low single-digit range expected earlier).

Total revenues are anticipated to increase 1% to 2% (decline 2% to 3% expected earlier) in the year.

Capital spending is estimated in the range of $60-$65 million ($50-$65 million expected earlier).

The effective income tax rate is likely to be around 16-17% (19-20% projected earlier).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 14.4% due to these changes.

Adtalem Global Education Inc. Price and Consensus

Adtalem Global Education Inc. Price and Consensus | Adtalem Global Education Inc. Quote

VGM Scores

At this time, ATGE has a poor Growth Score of F, however its Momentum is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, ATGE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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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