Shares of New Oriental Spike After Third-Quarter Results

New Oriental, one of China's largest education services, reported a high increase in revenue and a small net income for the third quarter; its shares spiked in early trading.

Anna Vodopyanova
    Apr 24, 2018 1:53 PM  PT
Shares of New Oriental Spike After Third-Quarter Results
author: Anna Vodopyanova   

The shares of New Oriental Education and Technology Group Inc. (NYSE: EDU) peaked 11 percent in early trading Tuesday after the company, a provider of educational services in China, reported better-than-expected earnings for the third quarter.

The Beijing-based company said its revenue surged 41 percent to $618.1 million for the three months ended Feb. 28, compared with the same period last year. Its net income grew 1.1 percent to $68.4 million, or 43 cents per share.

The growth was a result of a 30-percent upsurge of student enrollments in the second and third quarters of 2018, the company said.

New Oriental said that it had largely increased its facilities across China's major and developing cities by opening schools and learning centers. Just in the third quarter, 60 additional units were opened. By the end of February, the total number of schools operated by the company reached 1000, compared with 803 at the same time last year.

A significant growth was noted by New Oriental in after-school tutoring programs for all grade levels, the revenue for which doubled last year's mark.

The company also expanded its online education platform, Koolearn.com. The year-over-year revenue from the site grew 176 percent, the company reported. Chief executive officer of New Oriental, Chenggang Zhou, said the indication "reflected the company's endeavors and further boosted our confidence in making strategic investments to capitalize on the booming online education market."

Its cost of revenue for the quarter grew nearly 47 percent to $268.8 million, compared with the same period last year, due to increased teachers' working hours and salaries, as well as rental and operation of facilities.

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New Oriental shares spiked in early trading and closed at $90.16 per American depositary share, up 4 percent. (Source: Thomson Reuters Eikon)

Overall, for the nine months through February, New Oriental reported a revenue of $1.7 billion, an increase of 33 percent year-over-year.

"Our key focus remains the enhancement in operational efficiency, utilization of facilities, and cost control. We believe that with our well-proven expansion strategy, our strategic vision and investments will continue to create sustainable long-term value for our customers and shareholders," said chief financial officer of New Oriental, Stephen Zhihui Yang.

Jefferies raised the stock price target for New Oriental to $112 from $104 per share.

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