When nearly every stock you've ever heard of gains 2.6% (on average) in one day, while another stock plunges 14% in value, it's safe to say something bad happened to that other stock.
In the case of blue-collar, for-profit educator Universal Technical Institute
Quarterly sales slid twice as far as analysts had predicted, down 2% to $87 million, as students failed to show up in the necessary droves. UTI had to increase scholarships and tuition discounts to attract the few students who did show up. As a result, the company booked an operating loss for the quarter, bringing the year's operating margin down 500 basis points from last year to 6.7%. As of today, using the trailing twelve months, the only for-profit educator with worse operating margins is Corinthian Colleges
Sound the alarm
Worse than the numbers themselves, however, is what they may fortell of UTI's future. As I warned might be the case in our pre-earnings Foolish Forecast, UTI's anemic sales results were exacerbated by a raft of special charges. As a result, the company fell into the red this quarter, losing $0.05 per share on the bottom line.
As an absolute number, that's bad enough. But it also places UTI in a bit of a bind, because the terms of its revolving credit agreement with Wells Fargo
CEO Kimberly McWaters opined on Tuesday that UTI has "implemented a number of very important changes ... [but as] with any significant organizational change effort, time and persistence are required to realize the full benefit." Problem is, time is running out.
You know our opinion about Universal Technical (hint: It's no longer part of our Hidden Gems portfolio). But what do Wall Street's finest think about the firm? Find out in: