Universal Technical Institute's (UTI) average enrollment of the educational institute rose 8.5% in the first quarter but dropped 690 basis points sequentially. Moreover, the rate of fall in the new enrollments accelerated to 13% during the quarter, following a decline of 5% in fourth-quarter 2010.
Management warned that enrollment of new students for fiscal 2011 will be below the prior-year level due to regulations proposed by the Department of Education, and will consequently result in a single-digit revenue growth.
We have a long-term Underperform recommendation on the stock. Our target price of $16.00, 12.5X 2011 EPS, reflects this view.
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