Universal Technical (UTI) Q1 Earnings: What's In The Cards?

Universal Technical Institute, Inc. (NYSE:UTI) is slated to report first-quarter fiscal 2019 results on Feb 5, after market close. In the last reported quarter, this for-profit education company recorded a loss of 49 cents, which was in line with the Zacks Consensus Estimate. Notably, total starts marked 8.5% growth for the first time in eight years during the quarter.

Universal Technical Institute Inc Price and EPS Surprise

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

However, both the top and bottom lines declined on a year-over-year basis, mainly due to 2.1% reduction in average student population. The company’s loss during fiscal fourth-quarter 2018 was wider than the year-ago level of 8 cents. Revenues also decreased 1.3% from the prior-year quarter.

Nevertheless, shares of Universal Technical have gained 18.7% against its industry’s decline of 17.6% in the past year.

Earnings & Revenue Expectation

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

The Zacks Consensus Estimate for the fiscal first quarter is pegged at a loss of 11 cents, implying growth of 46.6% on a year-over-year basis. The consensus estimate for revenues is pegged at $81.3 million, reflecting an increase of 0.2% from the year-ago quarter.

Let’s See How Things are Shaping Up for This Announcement

Universal Technical’s fiscal first quarter results are likely to be benefitted by its focus on optimization of media mix, cost-saving plans, focus on smaller campus and original equipment manufacturers (“OEMs”) relationships.

The company has been enhancing its marketing competencies by creating higher-quality inquiries with a new media-mix model. The company’s digital advertising channels as well as local channels focus on potential students, and their families. Resultantly, its media inquiries in fiscal 2018 grew to 40% from 30% a year ago.

Universal Technical focuses on opening smaller commuter-friendly campuses in high-demand locations in order to drive enrollments and profitability. The main aim of the company is to benefit those students who live and work in close proximity to the campus.

Universal Technical works with leading OEMs to gain a competitive advantage. It works closely with more than 30 leading OEMs in the automotive, diesel, motorcycle and marine industries. Under the OEM relationships, sponsors allow their new products to be used for training in classrooms, which enables students to get an opportunity to work on a variety of highly popular mechanism of these OEMs, thereby improving their job prospects and wage levels.

Meanwhile, it has been undertaking several initiatives to reduce expenses. Universal Technical is a primary provider of manufacturer specific advanced training (“MSAT”) programs that offer a cost-effective alternative for sourcing, as well as developing technicians for both OEMs and their dealers. For fiscal 2019, operating expenses are projected in the range of $337-$347 million versus $352.2 million incurred in fiscal 2018.

All these initiatives are likely to aid the company to post decent enrollments. Notably, in the last reported quarter, Universal Technical’s new student starts increased 8.5% for the first time in eight years. In fiscal 2019, the company expects mid-high single digit growth in student starts via further optimization of its marketing and admission processes, new campuses, as well as latest programs. Also, EBITDA is likely to be in the range of $5-$11 million versus $(16.7) million recorded in fiscal 2018.

What the Zacks Model Says

Our proven model shows that Universal Technical is unlikely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat the Zacks Consensus Estimate.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Universal Technical currently carries a Zacks Rank #3.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some consumer discretionary stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Penn National Gaming, Inc. (NASDAQ:PENN) has an Earnings ESP of +4.76% and a Zacks Rank #3. The company is slated to report quarterly results on Feb 7.

The Marcus Corporation (NYSE:MCS) has an Earnings ESP of +1.45% and a Zacks Rank #1. The company is expected to report quarterly results on Feb 28.

Carnival Corporation (NYSE:CCL) has an Earnings ESP of +1.44% and holds a Zacks Rank #3. The company is likely to report quarterly numbers on Mar 28.

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