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Why New Oriental Education Stock Got Crushed Today

By Evan Niu, CFA - Jan 22, 2021 at 12:59PM

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The Chinese educational services company reports quarterly results.

What happened

Shares of New Oriental Education (EDU 7.22%) have gotten crushed today, down by as much as 10%, after the company reported fiscal second-quarter earnings. The results beat expectations, while guidance was mostly in line with current estimates.

So what

Revenue in the fiscal second quarter increased 13% to $887.7 million, which was ahead of the $882.3 million in sales that Wall Street analysts were modeling for. That translated into adjusted earnings per American depositary share (ADS) of $0.43, topping the consensus estimate of $0.33 per ADS in adjusted profits. The company recently listed its shares on the Hong Kong Stock Exchange, raising nearly $1.5 billion in fresh capital.

Red stock chart going down

Image source: Getty Images.

"We are pleased to see the recovery of businesses for the autumn semester after the resumption of schools and learning centers since the end of September 2020," Executive Chairman Michael Yu said in a statement. "As the pandemic situation in China has been stabilized and effectively controlled during the quarter, our businesses in most of the cities resumed and managed to deliver encouraging results."

Now what

The consumer discretionary company, which provides educational services in China, said total student enrollments increased 10% to nearly 4.2 million. New Oriental Education now has 1,518 schools and learning centers. CEO Chenggang Zhou added that the industry is expected to consolidate once the pandemic is over.

Looking ahead, New Oriental Education expects revenue in the fiscal third quarter, which ends on Feb. 28, to be in the range of $1.1 billion to $1.14 billion, compared to the $1.13 billion in sales that the market is currently expecting.

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