Earnings Beat: New Oriental Education and Technology Group Inc.
It’s been a great week New Oriental Education and Technology Group Inc. (NYSE:EDU) shareholder, its shares rose 19% to US$27.41 in the week since its latest annual results. Statutory results were mixed overall, with revenue of US$3.1b in line with analyst forecasts, but a loss of US$7.00 per share, some 6.2% larger than analysts expected. Analysts typically update their forecasts on each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are new concerns to be aware of. We thought readers would find it interesting to take a look at analysts’ latest (statutory) post-earnings forecasts for next year.
Following the latest results, 13 analysts at New Oriental Education & Technology Group agree for revenue of US$2.44b in 2023, reflecting a 22% decline in sales compared to the previous year of performance. The deficit is predicted to drop significantly, shrinking 100% to US$0.02. Prior to this latest report, Consensus was expecting revenue of US$2.19b in impairment and US$0.15 per share. That’s why views have changed significantly after the most recent consensus update, with analysts making a major increase in their revenue forecasts, as well as reducing projected losses as the business moves toward breakeven.
The consensus price target rose 31% to US$31.86, encouraged by analysts’ higher revenue and lower forecast losses for the next year. It may also be instructive to look at the range of analyst estimates to evaluate how much outside opinions differ from the mean. Currently, the most bullish analysts value New Oriental Education and Technology Group at US$54.00 per share, while the most bearish ones are at US$18.60. As you can see the range of projections is wide, with the lowest valuation coming in at less than half the fastest estimate, suggesting how analysts believe this business will perform. With that in mind, we wouldn’t rely too heavily on the consensus price target, as it is just an average and analysts clearly have somewhat different views on the business.
Now looking at the bigger picture, one way to understand these forecasts is to look at how they measure up against both past performance and industry growth projections. We will highlight that a reversal in sales is expected, with forecasts for a 22% annual revenue decline by the end of 2023. This is a remarkable change from the historical growth of 14% over the past five years. Compare this with our data, which shows that other companies in the same industry, overall, expect their revenue to increase by 6.7% per year. So although its revenue is projected to decline, this cloud isn’t as expected — New Oriental Education & Technology Group is expected to lag behind the broader industry.
The most important thing to take away is that analysts reaffirmed their loss per share estimates for the following year. They also upgraded their revenue projections for next year, even though sales are expected to grow at a slower pace than the broader industry. We note upgrades to the price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company’s earnings is much more important than what it was next year. We have projections – from several New Oriental Education and Technology Group analysts – by 2025, and you can view them for free on our forum here.
You still need to pay attention to the risks, for example – New Oriental Education and Technology Group 1 warning sign We think you should be aware.
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