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Adtalem (ATGE) Lags Q1 Earnings Estimates, Enrollments Down

Adtalem Global Education Inc. ATGE reported first-quarter fiscal 2018 results, wherein both earnings and revenues fell short of expectations.

First-quarter fiscal 2018 adjusted earnings of 30 cents per share missed the Zacks Consensus Estimate of 48 cents by 37.5%. On a year-over-year basis, the company’s earnings declined 33.3%.

Adtalem’s quarterly net sales of $421 million missed the Zacks Consensus Estimate of $429 million by 1.9%. Total revenues also declined 6.4% from the year-ago quarterly figure, wider than the company’s expectation of a 4-5% decline. Total students enrollments fell 4% and new students enrollments dropped 8.6%.

The company’s total operating cost and expenses contracted 2.4% year over year to $406.6 million in the quarter. Operating income was $14.4 million in the quarter, compared to $33.1 million reported in the prior-year quarter.

DeVry Education Group Inc. Price, Consensus and EPS Surprise



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 first quarter, segmental revenues of $191.3 million showed a decline of 4.2% from the year-ago level. Growth at Chamberlain University was offset by lower revenues at the medical and veterinary schools.

At Chamberlain, revenues rose 2.2%. In September, new student enrollment declined 0.8% and total student count grew 4.5%.

Revenues from the medical and veterinary schools decreased 12.4% year over year.

Operating income at the segment was $26.2 million, down 40.2% from the prior-year quarter.

Hurricanes Irma and Maria affected American University of the Caribbean School of Medicine and Ross University School of Medicine results. The disruption to the schools’ September basic science semester dented first-quarter revenues by approximately $7.0 million.

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 $40 million, up 15.3% year over year, primarily driven by ACAMS.

Adjusted operating income was $10.5 million, higher than $6.1 million recorded in the prior-year quarter.

Technology and Business: This segment, comprising Adtalem Brazil Institution, registered revenues of $62.4 million, up 7.2% year over year on increased student persistence and favorable currency rates.

This segment generated operating income of $1.9 million as against a loss of $2 million. The improvement was driven by revenue growth and cost efficiencies.

US Traditional Postsecondary: This reporting segment includes results of DeVry University and Carrington College.

The segment registered revenues of $127.9 million, down 19% year over year owing to decreased revenues from DeVry University in Carrington.

DeVry University generated revenues of $95.8 million in the quarter, down 20.8% due to continued decline in enrollment. Meanwhile, Carrington’s revenues dropped 13.1% to $32.1 million.

This division incurred an operating loss (adjusted for special item) of $13.3 million compared with a loss of $6.9 million a year ago.

In September, undergraduate new student enrollments decreased 17.7% and total student count declined 21.4%.

Q2 Guidance

Revenues are expected to decline 4% to 5% year over year.

Operating costs (before special items) are expected to decline 1% to 2% year over year as a result of continued cost reduction at DeVry University and Carrington College.

Fiscal 2018 Guidance

The company expects earnings per share growth for fiscal 2018 in the low single-digit range.

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

Capital spending is estimated in the range of $50-$65 million ($65-$70 million expected earlier).

The effective income tax rate is likely to be around 19-20% (21-22% projected earlier).

Zacks Rank & Upcoming Peer Release

Adtalem currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Public Education, Inc. APEI is scheduled to report third-quarter 2017 results on Nov 7. The Zacks Consensus Estimate for quarterly earnings is pegged at 21 cents.

Peer Releases

Strayer Education Inc. STRA reported third-quarter 2017 adjusted earnings of 34 cents per share, missing the Zacks Consensus Estimate of 37 cents by 8.1%. Earnings increased 36% year over year.

Capella Education Company CPLA reported earnings of 73 cents per share in the third quarter, which surpassed the Zacks Consensus Estimate of 68 cents by 7.4%. However, earnings declined 9.9% year over year.

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