Shares of transportation and technical training programs provider Universal Technical Institute, Inc. (UTI) have gained 30% over the past six months. The company’s recent fourth-quarter performance exceeded expectations on the revenue front.
Owing to higher average student numbers and lower student leaves of absence, UTI’s Q4 revenue increased 27.7% year-over-year to $97.5 million, exceeding analysts’ estimates by $1.7 million. Meanwhile, earnings of $0.20 per share fell short of estimates by $0.04.
Notably, new student starts for the company increased 6.8%, indicating strong front-end demand. With these developments in mind, let us take a look at the changes in UTI’s key risk factors that investors should know.
Risk Factors
According to the TipRanks Risk Factors tool, Universal Technical Institute’s top two risk categories are Finance & Corporate and Legal & Regulatory, contributing 32% each to the total 38 risks identified.
Meanwhile, compared to a sector average of 11%, UTI’s Tech & Innovation risk factor is at 13%. In its recent annual report, the company has added four key risk factors.
UTI noted that it is a party to a credit agreement, which includes restrictive covenants. If the company fails to comply with these covenants, then the lender could declare a default. In such a scenario, UTI may have to immediately repay the amount due, under the agreement. Additionally, any increase in interest rates could lead to higher debt servicing costs for the company, which could also impact its profitability.
UTI also highlighted that expanding its blended learning format could be difficult. Expanding or creating new blended programs may not see desired acceptance by students or employers. Furthermore, heightened competition in the online or blended education market could also pose a challenge.
Finally, UTI also noted that its business could see an adverse impact from natural or man-made catastrophes, including climate change and other causes.
Hedge Fund Activity
According to TipRanks data, Wall Street’s top hedge funds have decreased holdings in Universal Technical Institute by 2.5 thousand shares in the last quarter, indicating a neutral hedge fund confidence signal in the stock based on activities of 2 hedge funds in the recent quarter.
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