Friday was not a good school day for early education and child care services provider KinderCare Learning (KLC 8.01%). The company published first-quarter results that slightly beat analyst estimates but revealed a decline in a key business. As a result, investors sold out of the stock on the last trading day of the week, leaving it with an 8% loss.
The twin beats weren't enough
KinderCare unveiled those figures after market close Thursday, reporting that its revenue bumped 0.6% higher year over year to $672.5 million. By contrast, the company's net income not under generally accepted accounting principles (GAAP) withered to $4.2 million ($0.04 per share) from the year-ago profit of slightly over $27 million.
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While the bottom-line fall was worrying, KinderCare actually beat the average analyst forecast of a $0.01 per share non-GAAP (adjusted) loss. The company also topped the pundit consensus of $669 million for revenue.
Looking ahead, KinderCare raised its adjusted net income guidance for the full year 2026. It's now anticipating $0.15 to $0.25 per share; formerly, its range was $0.10 to $0.20. Meanwhile, it left its revenue outlook unchanged at $2.7 to $2.75 billion. The consensus analyst projections of $0.15 and $2.71 billion, respectively, fall within the current ranges.
NYSE: KLC
Key Data Points
Slight decline leads to big concern
A deeper dive into KinderCare's results unearthed a negative development for the company. It splits its business between early childhood education centers and before- and after-school sites, with the former generating nearly ten times the revenue of the latter.
And that was an issue in the quarter. Early childhood center revenue slid by nearly 1%, due to reduced enrollment. The slide would have been more pronounced had the company not raised tuition.
In other words, enrollment in its No. 1 revenue stream is evaporating, and KinderCare is hiking prices to mitigate this. This doesn't speak well for the attractiveness of its offerings, nor does it show management has a better idea how to reignite growth. Given that fact alone, I wouldn't be a buyer of the stock these days.
