Universal Technical Cuts Workforce - Analyst Blog
01 Juillet 2011 - 10:45AM
Zacks
Universal Technical
Institute Inc. (UTI), which provides professional
automotive, diesel, collision repair, motorcycle and marine
programs, recently announced a cut in its
workforce.
The regulation proposed by the
Department of Education is weighing upon student enrollments of the
company. The rate of growth of average undergraduate full-time
student enrollment decelerated to 3.3% during second-quarter 2011
from 8.5% in the previous quarter.
Moreover, total student starts for
the quarter dropped 12.2%. Universal Technical Institute warned
that enrollment of new students for fiscal 2011 will decrease from
the prior year, thereby resulting in a low single-digit revenue
growth.
Hence, to better align its cost
structure with the student count, the company chopped 195 jobs.
Currently, Universal Technical Institute Inc. has approximately
2,270 employees.
Universal Technical expects
a charge of $4.3 million on its third quarter 2011 results relating
to the layoffs. Moreover, the move will result in expense savings
of $12.4 million in fiscal 2012.
Universal Technical’s programs are
highly dependent on the health of the automobile sector, which was
hit hard by the recent economic downturn. This is especially a
matter of concern for Universal Technical as its prospective
students may shift preferences to other sectors.
Further, the Department of
Education could limit, suspend or terminate Universal Technical’s
participation in Title IV programs for violations of the Higher
Education Act or Title IV regulations, which may impact its revenue
growth potential.
Moreover, Universal Technical faces
intense competition from other companies offering postsecondary
education, such as Lincoln Educational Services
Corp. (LINC) and Corinthian Colleges Inc.
(COCO). Moreover, the company also competes with traditional
two-year junior and community colleges. Consequently, this may dent
the company’s sales and margins.
Currently, we have a long-term
‘Underperform’ rating on the stock. However, Universal Technical
holds a Zacks #3 Rank, which translates into a short-term ‘Hold’
recommendation.
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