Universal Technical Misses on Q4 Earnings & Rev

Zacks Equity Research
December 4, 2013

Universal Technical Institute, Inc.’s (UTI) fourth-quarter fiscal 2013 adjusted earnings of 7 cents per share lagged the Zacks Consensus Estimate of 10 cents by 30%. Earnings also declined 36.4% from the prior-year quarter earnings of 11 cents due to lower top-line growth and weak margins. The adjusted earnings exclude severance cost of $1.6 million related to the retirement of its board chairman.

Net revenue of $95.8 million missed the Zacks Consensus Estimate of $97 million by 1.2% and declined 5.4% from the prior-year quarter due to a decline in enrollments. However, average revenue per student improved 1.5%.

Quarter in Detail

The mechanical training institute reported a 6.4% decline in average undergraduate full-time enrollment to 14,600 in the fourth quarter. Total student starts improved 9.5% to 6,900 in the quarter, driven by a higher number of applications and an additional start date in the quarter. Total student starts in the fourth quarter lies at the higher end of the management guidance of mid- to upper-single digit. Moreover, military student starts grew 11.0% and high school starts grew 2.1%.

Enrollment has been trending down consistently over the past few quarters as a result of macroeconomic headwinds; sluggish demand due to reluctance in taking loans and continued challenges in obtaining student financing; changing regulatory requirements; increased price sensitivity and affordability concerns; and increased competition.

Though these macro challenges continue, the auto/transportation market is rebounding, which in turn is increasing market demand for skilled auto technicians. Accordingly, the company witnessed improved student applications in the quarter.

Operating margin for the fourth quarter of fiscal 2013 declined 70 basis points from the prior year quarter to 1.5% due to a decline in revenues, partially offset by a drop in compensation and advertising expense.  

Fiscal 2013

Earnings for the fiscal year declined 47.2% to 19 cents from 36 cents in the prior year. Fiscal 2013 revenues declined 8% year over year to $380.3 million.

Financial Details

Cash, cash equivalents and investments totaled $97.4 million as of Sep 30, 2013 compared to $87.4 million as of Jun 30, 2013.


In the first quarter of 2014, the company expects new student starts to decline, worse than prior expectations of flat numbers.

For fiscal 2014, the company expects flat new student starts despite an expected high single-digit increase in number of applications due to time lag for conversions. The company expects low single digit revenue growth for fiscal 2014 on the back of increased number of scholarships and smaller increase in tuition fee.  

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

Some better-ranked stocks in the education sector include New Oriental Education & Technology Group Inc. (EDU), Capella Education Company (CPLA) and TAL Education Group (XRS). While New Oriental Education carries a Zacks Rank #1 (Strong Buy), Capella and TAL Education hold a Zacks Rank #2 (Buy).

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