New Oriental Stock Down on Q2 Earnings Lag, Revenue Beat

New Oriental Education & Technology Group Inc. EDU reported mixed results in the second quarter of fiscal 2025 (ended Nov. 30, 2024). Earnings missed the Zacks Consensus Estimate, but net revenues surpassed the same. New Oriental stock plunged 23.2% yesterday during the trading session.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.In the fiscal second quarter, the company focused on aligning capacity expansion with revenue growth and operating efficiency. EDU also worked on enhancing its online-merge-offline teaching system and implemented new technologies to improve user experience and support the growth of the company’s educational offerings.Delving Deeper Into EDU’s Q2 ResultsDuring the fiscal second quarter, the company reported adjusted earnings of 22 cents per ADS, missing the consensus estimate of 47 cents by 53.2%. Also, the reported figure decreased 24.1% on a year-over-year basis.Total revenues during the fiscal second quarter totaled $1,038.6 million, which surpassed the consensus mark marginally by 0.4% and grew 19.4% from the year-ago period. Excluding revenues from East Buy private label products and live streaming business, net revenues amounted to $894.2 million, marking a 31.3% increase compared with the prior year. This growth was largely driven by the company's new educational business initiatives.New Oriental Education & Technology Group, Inc. Price, Consensus and EPS Surprise New Oriental Education & Technology Group, Inc. price-consensus-eps-surprise-chart | New Oriental Education & Technology Group, Inc. QuoteThe overseas test preparation and study consulting segments experienced year-over-year growth of 21.1% and 31.0%, respectively. Additionally, the domestic test preparation business, targeting adults and university students, achieved year-over-year growth of 34.9%.EDU's new educational initiatives continued to gain traction during the fiscal second quarter, recording a 42.6% increase in revenues compared with the same period last year. Non-academic tutoring courses were offered in approximately 60 cities, attracting around 994,000 student enrollments. Additionally, the company’s intelligent learning systems and devices were adopted in about 60 cities, with approximately 261,000 active paid users. These efforts align with EDU’s strategy to achieve sustainable growth and improve profitability through better service quality and operational efficiency.EDU’s Operating HighlightsCost of revenues grew 17.9% year over year to $498.3 million. Non-GAAP operating costs and expenses for the fiscal second quarter totaled $1,011.1 million, indicating a 23.5% year-over-year increase. This increase was mainly due to costs associated with the accelerated capacity expansion of educational businesses and the newly integrated tourism-related business.Selling and marketing expenses increased 26.6% from the prior-year quarter. Non-GAAP general and administrative expenses, which exclude share-based compensation costs, also rose 24.7% from the reported figure of the prior-year period.Non-GAAP operating income during the fiscal quarter totaled $27.6 million, down 45.8% year over year. Non-GAAP operating margin decreased 320 basis points (bps) to 2.7% compared with 5.9% reported a year ago.The non-GAAP operating margin, excluding contributions from East Buy private label products and live streaming business, improved 12 bps year over year by 3.2%. Despite the fiscal second quarter being seasonally slower, the company recorded a slight improvement in the operating margin for its core educational business compared with the previous year. This demonstrates resilience in managing profitability within its primary operations.EDU’s FinancialsAs of Nov. 30, 2024, the company had total cash and cash equivalents of approximately $1,418.2 million compared with $1,389.4 million at the end of fiscal 2024.In July 2022, the company’s board of directors approved a share repurchase program, initially authorizing up to $400 million for the repurchase of ADS or common shares within 12 months. The program was later extended to May 31, 2025, with the authorization increased to $700 million. As of Jan. 20, 2025, the company had repurchased about 11.2 million ADS from the open market, amounting to $542.8 million.Third-Quarter Fiscal 2025 Guidance of EDUThe company expects total revenues, excluding revenues generated from East Buy private label products and live streaming business, between $1,007.3 million and $1,032.5 million, indicating 18-21% growth from a year ago. EDU remains confident to deliver continued margin expansion going forward and generate sustainable long-term value for its customers and shareholders.EDU’s Zacks RankNew Oriental currently carries a Zacks Rank #3 (Hold).Stocks to ConsiderSome better-ranked stocks in the Zacks Consumer Discretionary sector are as follows:Lindblad Expeditions Holdings, Inc. LIND currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The stock has surged 22.8% in the past year. The Zacks Consensus Estimate for LIND’s 2025 sales and earnings per share (EPS) indicates growth of 10.2% and 93.1%, respectively, from the year-ago levels.Carnival Corporation & plc CCL currently carries a Zacks Rank #2. CCL delivered a trailing four-quarter earnings surprise of 326.4%, on average. The stock has surged 58.7% in the past year.The Zacks Consensus Estimate for CCL’s fiscal 2025 sales and EPS indicates growth of 4.1% and 24.7%, respectively, from the year-ago levels.Royal Caribbean Cruises Ltd. RCL currently carries a Zacks Rank #2. RCL delivered a trailing four-quarter earnings surprise of 16.2%, on average. The stock has surged 94.3% in the past year.The Zacks Consensus Estimate for RCL’s 2025 sales and EPS indicates growth of 9.4% and 23.9%, respectively, from the year-ago levels.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Carnival Corporation (CCL): Free Stock Analysis Report Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report New Oriental Education & Technology Group, Inc. (EDU): Free Stock Analysis Report Lindblad Expeditions (LIND): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks