On Friday, Shares of (NYSE: ) gained 0.63% to $90.76. The stock grabbed the investor’s attention and traded 646.375K shares as compared to its average daily volume of 1.36M shares. The stock’s institutional ownership stands at 85.80%.

New Oriental Education & Technology Group Inc. (EDU) stated fiscal third-quarter net income of $97.40M.

Financial Results for the Third Fiscal Quarter Ended February 28, 2019

Net Revenues:

For the third fiscal quarter of 2019, New Oriental stated net revenues of US$796.70M, representing a 28.9% increase year-over-year. Net revenues from educational programs and services for the third fiscal quarter were US$727.10M, representing a 28.7% increase year-over-year. The growth was mainly driven by increases in student enrollments in K-12 after-school tutoring courses.

Operating Costs and Expenses:

Operating costs and expenses for the quarter were US$700.90M, representing a 25.2% increase year-over-year. Non-GAAP operating costs and expenses for the quarter, which exclude share-based compensation expenses, were US$683.00M, representing a 27.2% increase year-over-year.

  • Cost of revenues increased by 25.6% year-over-year to US$337.50M, mainly because of increases in teachers’ compensation for more teaching hours and rental costs for the increased number of schools and learning centers in operation.
  • Selling and marketing expenses increased by 13.3% year-over-year to US$87.50M, mainly because of increases in brand promotion expenses and selling and marketing staff’s compensation.
  • General and administrative expenses for the quarter increased by 29.1% year-over-year to US$276.00M. Non-GAAP general and administrative expenses, which exclude share-based compensation expenses, were US$258.00M, representing a 35.1% increase year-over-year. The increase was mainly because of increased headcount as the Company grew its network of schools and learning centers, as well as increases in R&D expenses and human resources expenses related to the development of the Company’s online and offline integrated education ecosystem.

Total share-based compensation expenses, which were allocated to related operating costs and expenses, reduced by 21.1% to US$18.00M in the third fiscal quarter of 2019.

Operating Income and Operating Margin:

Operating income for the quarter was US$95.80M, representing a 64.1% increase year-over-year. Non-GAAP operating income was US$113.80M, representing a 40.2% increase year-over-year. Operating margin for the quarter was 12.0%, contrast to 9.4% in the same period of the prior fiscal year. Non-GAAP operating margin, which excludes share-based compensation expenses, for the quarter was 14.3%, contrast to 13.1% in the same period of the prior fiscal year.

Gain from Fair Value Change of Long-Term Investments:

Gain from fair value changes of long term investments for the quarter was US$6.50M.

Net Income and EPS:

Net income attributable to New Oriental for the quarter was US$97.40M, representing a 42.5% increase from the same period of the prior fiscal year. Basic and diluted earnings per ADS attributable to New Oriental were US$0.62 and US$0.61, respectively.

Non-GAAP Net Income and Non-GAAP EPS:

Non-GAAP net income attributable to New Oriental for the quarter was US$108.90M, representing a 19.4% increase from the same period of the prior fiscal year. Non-GAAP basic and diluted earnings per ADS attributable to New Oriental were US$0.69 and US$0.69, respectively.

Cash Flow:

Net operating cash flow for the third fiscal quarter of 2019 was about US$114.10M. Capital expenditures for the quarter were US$83.60M, which were mainly attributable to the opening of 59 facilities and renovations at existing learning centers.

Balance Sheet:

As of February 28, 2019, New Oriental had cash and cash equivalents of US$844.90M, as contrast to US$983.30M as of May 31, 2018. In addition, the Company had US$96.70M in term deposits, and US$1,792.70M in short-term investment.

Financial Results for the Nine Months Ended February 28, 2019

For the first nine months of fiscal year 2019, New Oriental stated net revenues of US$2,253.60M, representing a 29.0% increase year-over-year.

Total student enrollments in academic subjects tutoring and test preparation courses in the first nine months of fiscal year 2019 increased by 31.7% to about 5,626,700.

Income from operations for the first nine months of fiscal year 2019 was US$228.60M, representing a 10.8% increase year-over-year. Non-GAAP income from operations for the first nine months of fiscal year 2019 was US$274.20M, representing a 13.5% increase year-over-year.

Non-GAAP net income attributable to New Oriental for the first nine months of fiscal year 2019 was US$316.00M, representing a 18.7% increase year-over-year. Non-GAAP basic and diluted net income per ADS attributable to New Oriental for the first nine months of fiscal year 2019 amounted to US$1.99 and US$1.99 respectively.

Outlook for Fourth Quarter of Fiscal Year 2019

New Oriental anticipates total net revenues in the fourth quarter of fiscal year 2019 (March 1, 2019 to May 31, 2019) to be in the range of US$820.60M to US$840.60M, representing year-over-year growth in the range of 17% to 20%. This forecast takes into account factors counting the industry seasonality and practices in compliance with the most recent regulatory requirements.

EDU has a market value of $14.31B while its EPS was booked as $1.46 in the last 12 months. The stock has 157.69M shares outstanding. In the profitability analysis, the company has gross profit margin of 55.50%. Beta value of the company was 1.59; beta is used to measure riskiness of the . Analyst recommendation for this stock stands at 1.80.

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