Education Management Beats on EPS but GAAP Results Lag

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Education Management (NAS: EDMC) reported earnings on Feb. 1. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q2), Education Management met expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue increased slightly and GAAP earnings per share shrank significantly.

Margins dropped across the board.

Revenue details
Education Management tallied revenue of $682.1 million. The 12 analysts polled by S&P Capital IQ hoped for net sales of $677.7 million. Sales for the prior-year quarter were $666.0 million.

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Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS details
Non-GAAP EPS came in at $0.24. The 12 earnings estimates compiled by S&P Capital IQ predicted $0.21 per share on the same basis. GAAP EPS of $0.49 for Q1 were 20% lower than the prior-year quarter's $0.61 per share.

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Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 48.9%, 260 basis points worse than the prior-year quarter. Operating margin was 17.6%, 510 basis points worse than the prior-year quarter. Net margin was 8.6%, 240 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $744.9 million. On the bottom line, the average EPS estimate is $0.46.

Next year's average estimate for revenue is $2.82 billion. The average EPS estimate is $1.34.

Investor sentiment
The stock has a one-star rating (out of five) at Motley Fool CAPS, with 34 members out of 58 rating the stock outperform, and 24 members rating it underperform. Among 17 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), nine give Education Management a green thumbs-up, and eight give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Education Management is hold, with an average price target of $20.10.

At the time this article was published Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor ofMotley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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