A month has gone by since the last earnings report for Adtalem Global Education (ATGE Quick QuoteATGE - Free Report) . Shares have lost about 2.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Adtalem due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Adtalem’s Q3 Earnings & Revenues Top Estimates

Adtalem Global Education reported impressive results for third-quarter fiscal 2023. Earnings and revenues surpassed their respective Zacks Consensus Estimate and increased year over year, given the continued benefit from initiatives and cost synergies.

In this connection, Steve Beard, president and CEO of Adtalem, said, “We continue to make steady progress in strengthening our operational excellence, supporting our portfolio of programs and solutions in ways that benefit all our stakeholders, especially our students. One testament to these benefits are the first time residency attainment rates for American University of the Caribbean School of Medicine and Ross University School of Medicine students attaining 2023/24 residency positions which, at 97%, are among the highest-ever for these institutions.”

Earnings & Revenues Discussion

Adjusted earnings of $1.13 per share topped the consensus mark of 92 cents by 22.8% and surged 34.5% from 84 cents in the year-ago quarter.

Revenues of $369.1 million beat the consensus mark of $355 million by 3.9% and increased 1.3% year over year, driven by strong enrollment at Chamberlain and Medical and Veterinary units. For the fiscal third quarter, enrollment of total students fell 3.1% year over year to 79,586 but improved sequentially.

Adjusted operating income dropped 4.3% from the prior-year quarter’s levels to $73 million. Adjusted operating margin declined 110 basis points to 19.8%. Adjusted EBITDA was $85.9 million, down 6.8% from the prior-year quarter’s levels. Adjusted EBITDA margin contracted 200 bps to 23.3% year over year.

Segment Details

Chamberlain: Revenues in the segment were up 5% from the year-ago quarter’s levels, totaling $149.7 million. Total student enrollment increased 2% to 34,847 students, driven by growth in pre-licensure and post-licensure nursing programs and higher persistence across the segment.
Adjusted operating income inched up 1.7% from the prior-year quarter’s levels to $39.6 million. Adjusted operating margin, however, contracted 90 basis points to 26.4%. Adjusted EBITDA was $44.9 million, down 1.3% from the prior-year quarter’s levels. Adjusted EBITDA margins also fell 190 basis points (bps) to 30%.

Walden: The segment generated revenues of $132.9 million, declined 4.5% year over year. Total student enrollment in the quarter declined 7.9% year over year to 39,427 students. This was due to declines in non-healthcare programs and to a lesser extent to healthcare programs partially offset by higher persistence across the segment.

Adjusted operating income came in at $24.6 million, down 4.7% from a year ago. Adjusted operating margin contracted 10 basis points to 18.5%. Adjusted EBITDA was $27.8 million, down 4.9% from the prior-year period’s levels. Adjusted EBITDA margins declined 10 bps to 20.9%.

Medical and Veterinary: Revenues in the segment increased 4.6% to $86.5 million from the year-ago quarter’s figure. Total student enrollment rose 1.6% from the prior-year quarter’s levels to 5,312 students, backed by growth in medical and veterinary programs.

Adjusted operating income declined 6.9% from the prior-year quarter’s figure to $16.9 million. Adjusted operating margin contracted 240 basis points to 19.5%. Adjusted EBITDA was $20.7 million, down 8.4% from the prior-year quarter’s levels. Adjusted EBITDA margins fell 260 bps to 24%.

Liquidity & Cash Flow

As of Mar 31, 2023, Adtalem had cash and cash equivalents of $315.4 million compared with $347 million at the end of fiscal 2022. Long-term debt was $694.4 million, down from $838.9 million at the end of fiscal 2022. Trailing 12-months net debt to adjusted EBITDA was 1.1x at March end.

For the first nine months of fiscal 2023, cash provided by operating activities (continuing operations) totaled $149.4 million compared with $51.9 million in the year-ago period. Free cash flow in the quarter was $98.2 million compared with $70.3 million a year ago.

In the reported quarter, ATGE repurchased $48 million shares.

Fiscal 2023 Guidance Narrowed

Adtalem expects revenues within $1,400-$1,450 million from $1,380-$1,450 million expected earlier. Also, it has raised the low range of the previously-guided adjusted earnings per share (EPS) of $3.95-$4.20 to $4.05.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -23.27% due to these changes.

VGM Scores

Currently, Adtalem has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Adtalem has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.