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Universal Technical (UTI) Q4 Loss Narrower than Expected


Universal Technical Institute, Inc. UTI reported narrower-than-expected loss in fourth-quarter fiscal 2016. Following the news, share price gained 1.3% and closed at $2.42.

The company’s adjusted loss of 13 cents per share in the quarter was narrower than the Zacks Consensus Estimate of a loss of 29 cents by 55.2%. In the year-ago quarter, the company had posted a loss of 9 cents per share.

Earnings were adjusted to exclude the negative impact of the income tax expense related to the valuation allowance, severance expense related to the reduction in workforce and the contribution from its new campus in Long Beach, CA.

Revenues & Enrollment

Revenues of $86.9 million in the fourth quarter fell 4.1% from the prior-year quarter due to lower total enrollment.

The top line, however, excluded revenues of $4.2 million related to the loan program during the quarter. The company intends to include this amount in the forthcoming quarters as students pay back their debts.

Revenues for fiscal 2016 were $347.1 million, reflecting a 4.3% decrease from $362.7 million in fiscal 2015. However, revenue per student improved 5.6% in the quarter.

Universal Technical reported an 8.6% drop in average undergraduate full-time enrollments in the quarter. The decline can be attributed to lower student population at the commencement of the quarter and weak student starts. Total starts declined 6.7% in the quarter.

Universal Technical’s enrollments have been sluggish for several quarters due to regulatory challenges, along with changes and competition in the higher education industry.

During the year, Universal Technical undertook several initiatives to return to profitability in 2017. It restructured the business to take out $30 million in annual expenses, and raised $70 million in capital which the company believes will speed up the opening of smaller campuses.

The company reported adjusted operating loss (excluding the impact of the Long Beach, California campus and the severance charges) of $2 million in the quarter.


The company has cash and cash equivalents of $119 million as of Sep 30, 2016, compared with $29.4 million in the prior year.

Cash flow provided by operating activities was $18.2 million in the fourth quarter of 2016, compared with $8.4 million for the same period last year.

Cash flow provided by operating activities was $7.4 million for the year ended Sep 30, 2016, compared with $8.2 million for the year ended Sep 30, 2015.

FY17 Guidance

Universal Technical expects fiscal 2017 student starts to decrease in the low single digit range.

Average student population is expected to be down in the mid to high single digits, as a percentage, compared to fiscal 2016.

Revenues are anticipated to be down in the low to mid single digits.

Financial Improvement Plan is expected to deliver $25 million to $30 million in annualized cost savings. The company believes the Plan will result in approximately breakeven operating income and positive EBITDA in spite of the decline in revenues.

Capital expenditure is expected in the range of $12.5 to $13.5 million.

Universal Technical expects volatility in its upcoming quarterly results due to seasonality and fluctuations in student population.

UNIVL TECH INST Price, Consensus and EPS Surprise

Universal Technical carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the school industry include Capella Education Company CPLA, DeVry Education Group Inc. DV and Grand Canyon Education, Inc. LOPE.

All three companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here

Fiscal 2017 earnings for DeVry are expected to increase 5.7%.

Capella is expected to witness 8.9% growth in full-year 2016 earnings.

Full-year 2016 earnings for Grand Canyon are expected to rise 12.9%.

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