Shares of Universal Technical Institute, Inc.’s (UTI) reached a 52-week high of $15.16 on Friday, Dec 6, 2013. Despite missing both the revenue and earnings estimates, Universal Technical’s share price has been rising ever since it reported better than expected student starts in the fourth quarter of fiscal 2013 and offered positive outlook for fiscal 2014.
The closing price of this automotive training school on Dec 6 was $15.09, yielding a year-to-date return of 57.5%.
Share Price Drivers
Universal Technical’s total student starts improved 9.5% to 6,900 in the fourth quarter of 2013, driven by higher number of applications and an additional start date in the quarter. The increase in total student starts was at the higher end of management guided range of mid- to high single-digit increase. Moreover, military student starts grew 11.0% and high school starts grew 2.1%.
Despite the macroeconomic challenges, the transportation industry is gaining momentum resulting in a growing demand for trained technicians. In fact, the company is positive about its future and expects low single digit revenue growth for fiscal 2014 on the back of increased number of scholarships and a slight increase in tuition fee. This is a significant improvement from the 8% and 8.5% decline in revenues the company witnessed in fiscal 2013 and fiscal 2012, respectively. The company expects high single digit increase in applications in fiscal 2014. The new student start rate is expected to be flat in 2014, compared to a decline of 4.5% in fiscal 2013 and 3.1% in fiscal 2012. The company further believes that with its focus on efficiencies and student outcomes, it will witness solid operating growth in fiscal 2014.
Universal Technical carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the education sector include New Oriental Education & Technology Group Inc. (EDU), Xueda Education Group (XUE) and TAL Education Group (XRS). While New Oriental Education carries a Zacks Rank #1 (Strong Buy), Xueda Education and TAL Education hold a Zacks Rank #2 (Buy).
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