TAL says policy change weighs on revenue

TAL Education Group's shares fell Tuesday after the Chinese tutoring company reported that a new education policy is weighing on its revenue. It reported disappointing third-quarter revenue and issued a weak fourth-quarter and full-year revenue forecast.

Its stock was among the top decliners on the New York Stock Exchange, falling nearly 5 percent to close at $8.83.

The company announced in October that it would be changing its mathematics course offerings in Beijing to adapt to a new education policy there. It warned investors that the changes could hurt enrollment in its third and fourth fiscal quarter but believes it will help the business in the long-run.

TAL reported Tuesday that the changes did hamper enrollment in Beijing during the quarter, but its total enrollment increased 9 percent to 153,000 students. Those enrollment gains and higher prices helped increase its total revenue 20 percent to $48.9 million. But that figure fell short of the $49.3 million that analysts polled by FactSet had expected.

TAL also struggled with higher staff costs during the period, as it expanded capacity of some of its learning centers.

The company earned $5.6 million, or 7 cents per share, for the quarter that ended Nov. 30. That is up from $1.4 million, or 2 cents per share, for the same quarter last year. On an adjusted basis, it earned 10 cents per share, compared with 4 cents per share last year. Analysts were expecting 1 cent per share.

CEO Bangxin Zhang said that the company focused this year on improving its operational efficiency, rather than maximizing its revenue growth.

"We remain optimistic about the attractive growth opportunity ahead of us, even though we anticipate the impact from the change of the Beijing policy to be somewhat longer and deeper than originally expected and we will not aggressively pursue rapid expansion in our one-on-one business for some time," Kauffman said in a statement.

The company said that it sees strong growth prospects in less-served markets but it will maintain modest and sustainable growth.

TAL expects revenue between $58 and $60 million for the fourth quarter; analysts had expected $64.1 million. It expects revenue between $224.3 million and $226.3 million for the full year; analysts were expecting $232.7 million.