Education Sector a Stock Market Highlight

The numbers are pouring in now, and there’s a lot of good news out there. As far as the bad news goes, there hasn’t been much in the way of major disappointments, only companies that are just slightly missing expectations.

One of my longtime favorite speculative companies just reported great financial results, but the net income figure was just shy on consensus estimates, while the revenue figure was just above.

New Oriental Education & Technology Group, Inc. (NYSE/EDU), announced that for its fourth fiscal quarter of 2007, revenues grew 29% to $24.9 million. The company cited that its student enrollment growth was very healthy in language training and test- preparation courses. Total student enrollments in this area grew 32% to approximately 314,000.

Naturally, with all the growth in new students, operating costs rose quickly. According to the company, total expenses for the quarter grew 22% to $28.4 million. Sales and marketing expenditures grew 48% to $5.0 million, due to a new nationwide marketing campaign to encourage enrollments in summer courses.


Net loss for the quarter was $1.6 million, representing a 65% improvement from the fourth quarter of fiscal year 2006. Consensus Wall Street analysts expected the company to be slightly profitable in this latest quarter.

It’s hard to get excited about a company like New Oriental Education & Technology when it just missed Wall Street’s net income number. The stock has doubled over the last six months, and the company’s growth prospects remain intact.

The stock may take a rest now, as it is quite pricey and investors would like to see more growth at this valuation.

I’m really enthusiastic about corporate earnings this quarter. I only worry about what investors will focus on after earnings season is over. The big story so far this season is the strength of large-cap earnings results, which is all the more impressive considering how slow the first half of the year has been. This bodes well for the major stock market averages.