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Universal Technical Institute Inc. (UTI), which provides professional automotive, diesel, collision repair, motorcycle and marine programs, is slated to report its first-quarter 2012 financial results after the bell on Thursday, February 2. The current Zacks Consensus Estimate for the quarter is 27 cents a share. The Zacks Consensus estimates revenue at $105 million.

Recap of Fourth-Quarter 2011

Universal Technical posted lower-than-expected fourth-quarter 2011 results. The quarterly earnings of 24 cents a share missed the Zacks Consensus Estimate of 28 cents, and dropped 17.2% from 29 cents earned in the prior-year quarter. This drop was attributable to fall in students’ enrollment.

Net revenue for the quarter declined 6.6% to $111.4 million from the prior-year quarter, and came marginally ahead of the Zacks Consensus Estimate of $111 million. The fall in revenue reflects decrease in average undergraduate full-time student enrollment, partially offset by a rise in tuition fees.

(Refer the article: UTI Misses on Bottom Line)

Zacks Consensus Projection for First-Quarter 2012

The analysts surveyed by Zacks expect Universal Technical to post first-quarter 2012 earnings of 27 cents a share. The current Zacks Consensus Estimate reflects a decline of 35.7% from the prior-year quarter. The estimates in the current Zacks Consensus for the quarter range from a low of 23 cents to a high of 34 cents.

Zacks Agreement & Magnitude

Of the eight analysts following the stock, none revised their estimates either up or down in the last 7 or 30 days, thereby keeping the Zacks Consensus Estimate unchanged at 27 cents.

Mixed Earnings Surprise History

With respect to earnings surprises, Universal Technical has missed as well as topped the Zacks Consensus Estimate over the last four quarters in the range of negative 14.3% to positive 28.6%. The average remains at positive 6.7%. This suggests that Universal Technical has outperformed the Zacks Consensus Estimate by an average of 6.7% in the trailing four quarters.

Price Stats

Since its last earnings release on November 29, 2011, Universal Technical’s market price has increased 14.7% to $13.95 on January 31, 2012. During trading hours on January 31, the stock reached an intra-day low of $13.88 and an intra-day high of $14.21.

Currently, the stock price is within its 52-week low-high range of $11.78 (attained on November 25, 2011) and $21.37 (achieved on July 13, 2011). From November 29, 2011 to January 31, 2012, the stock dropped to a low of $11.84 on December 19, 2011 and rose to a high of $14.78 on January 25, 2012.

Let’s Conclude

Universal Technical’s leading position in providing technical education to aspiring automotive professionals and its business model of working closely with leading original equipment manufacturers provide the company a competitive advantage. However, the regulation proposed by the Department of Education is weighing upon student enrollments.

To counter the sluggishness witnessed in student enrollment amid turbulent environment and regulatory issues, the company is pushing hard to manage costs effectively, trying every means to improve marketing efficiencies and is launching a new program focused on automotive and diesel.

The company further intends to bring its current and potential students under the proprietary loan program by increasing its accessibility, and enhance the count of need-based scholarships in fiscal 2012.

Universal Technical also stated that the rate of fall in new student starts has decelerated in the fourth quarter of 2011. Student starts for the quarter fell 14.5%, following a decline of 32.5% witnessed in the third quarter. Management hinted that applications and new student starts will drop but at a slower rate in the beginning of fiscal 2012, and will show improvement in the second half of the year.

However, management cautioned that average number of students for fiscal 2012 will drop at a low-teens rate, and will consequently result in a mid to high single-digit revenue decline. We observe that after dropping 3.8% in the third quarter of 2011, average undergraduate full-time student enrollment fell 11.3% in the fourth quarter.

The above analysis supports our Neutral stance on the stock. However, Universal Technical, which competes with Corinthian Colleges Inc. (COCO), holds a Zacks #5 Rank that translates into a short-term Strong Sell recommendation, and typifies the waning economy, a tough regulatory environment and falling enrollment that are adversely impacting the top and bottom line results.

 
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