New Oriental Education & Technology Group Earnings: Here’s Why Investors are Selling Shares Now

New Oriental Education & Technology Group (NYSE:EDU) delivered a profit and beat Wall Street’s expectations, BUT came up short on beating the revenue expectation. The revenue miss is a negative sign to shareholders seeking high growth out of the company. Shares are down 5.34%.

New Oriental Education & Technology Group Earnings Cheat Sheet

Results: Adjusted Earnings Per Share increased 80% to $0.18 in the quarter versus EPS of $0.10 in the year-earlier quarter.

Revenue: Rose 23.96% to $239.6 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: New Oriental Education & Technology Group reported adjusted EPS income of $0.18 per share. By that measure, the company beat the mean analyst estimate of $0.16. It missed the average revenue estimate of $240.39 million.

Quoting Management: Michael Yu, New Oriental’s Chairman and Chief Executive Officer, commented, “We are pleased to finish our 2013 fiscal year by recording strong revenue growth of 26.6% and substantial operating income growth of 122.5% in the fourth fiscal quarter. We are particularly encouraged that operating margin from continuing operations for the fourth fiscal quarter improved dramatically to 10.2% from 5.8% in the same period a year ago, which is an advance of 440 basis points year-on-year. Our stellar financial results in the third and fourth fiscal quarters demonstrate how we have successfully pivoted from our ‘Occupy the Market’ strategy towards our ‘Harvest the Market’ strategy. Since commencing this strategic transition in November 2012, we have driven improvements in bottom line performance by slowing our pace of expansion and closing over 50 underperforming learning centers. We have also reduced total headcount by over 3,600 in the last three quarters to approximately 30,700 by the end of our fiscal year from 34,300 at the end of the first fiscal quarter. Heading into fiscal year 2014, we will continue to focus on implementing the ‘Harvest the Market’ strategy, and we are confident that this will enable us to continue delivering improvements in operational efficiency and overall profitability.”

Key Stats (on next page)…

Revenue increased 9.67% from $218.47 million in the previous quarter. EPS were the same at $0.18 as the previous quarter.

Looking Forward: Analysts have a more positive outlook for the company’s next-quarter performance. Over the past three months, the average estimate for next quarter’s earnings has risen from a profit of $0.74 to a profit $0.78. For the current year, the average estimate has moved up from a profit of $0.76 to a profit of $0.83 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Email any earnings discrepancies to earnings [at] wallstcheatsheet.com)

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