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Universal Technical's (UTI) Q1 Loss Wider Than Expected

Zacks Equity Research

Universal Technical Institute, Inc. UTI recently reported fiscal first-quarter 2019 results, wherein loss of 17 cents per share was wider than the Zacks Consensus Estimate of 11 cents. The reported loss also widened from the year-ago level.

Nevertheless, quarterly revenues of $83.1 million surpassed the consensus mark of $81.3 million by 2.2%. Moreover, revenues increased 2.3% from the prior-year quarter, attributable to additional earning day and higher average tuition. Total starts also rose 14.8% year over year to 1,511 during the quarter.

Universal Technical Institute Inc Price, Consensus and EPS Surprise

Universal Technical Institute Inc Price, Consensus and EPS Surprise | Universal Technical Institute Inc Quote

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Operating Highlights

Operating expenses of $90.3 million grew 6.5% from a year ago due to $4.2 million rise in one-time transformation consultant termination cost. Rising student population at the Bloomfield campus contributed $1.6 million to the company’s direct costs.

Adjusted operating loss in the quarter was $3 million compared with $1.9 million in the prior-year period.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) declined 50% to $1.3 million from the prior-year figure of $2.6 million.

Financial Highlights

As of Dec 31, 2018, the company had cash and cash equivalents of $58.6 million compared with $58.1 million recorded in the corresponding period of last year.

Net cash provided by operations came in at $4.4 million in the fiscal first quarter compared with net cash used in operations of $2.6 million a year ago. Adjusted free cash flow of $5.6 million improved significantly from the prior-year quarter.

Reiterate Fiscal 2019 Outlook

Universal Technical expects mid-high single digit new student starts growth across its existing campuses, including the new Bloomfield, NJ campus. The average student population is likely to rise in low-single digits.

Fiscal 2019 revenues are expected in the range of $322-$332 million. Operating expenses are projected in the range of $337-$347 million.

Universal Technical expects to incur operating loss between $10 million and $15 million. Moreover, adjusted operating loss is anticipated in the range of $6-$11 million.

Adjusted EBITDA is anticipated in the range of $9-$15 million. Capital expenditure for fiscal 2019 is likely to be between $6 million and $8 million (versus $8-$10 million expected earlier).

Zacks Rank & Key Picks

Universal Technical currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Schools industry are GP Strategies Corporation GPX, K12 Inc. LRN and Bright Scholar Education Holdings Limited BEDU. While GP Strategies sports a Zacks Rank #1 (Strong Buy), K12 and Bright Scholar both carry a Zacks Rank #2 (Buy). You can the complete list of today’s Zacks #1 Rank stocks here.

GP Strategies has an expected earnings growth rate of 59.8% for 2019.

K12’s earnings per share are expected to increase 16.2% in fiscal 2019.

Bright Scholar is expected to record an EPS growth rate of 27.3% in fiscal 2019.

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