New Oriental impresses with revenue growth, but disappoints with profit expectations

The shares of New Oriental Education & Technology Group have significantly lost value in pre-market trading. This occurs despite a pleasing increase in revenue in the second quarter by 19.4 percent year-over-year to 1.038 billion USD, surpassing analysts' expectations of 1.009 billion USD. A strong rise in net revenue excluding contributions from private label products and the livestreaming business by 31.3 percent indicates the growing importance of new educational initiatives. Despite this growth, the adjusted earnings per American Depositary Share (ADS) at 0.22 USD fell short of the consensus forecast of 0.29 USD. Operating expenses rose by 20.2 percent to 1.02 billion USD, leading to a decrease in operating profit by 9.8 percent. In the first half of the fiscal year 2025, revenues increased by an impressive 25.6 percent to 2.47 billion USD. Furthermore, by the end of January 2025, approximately 11.2 million ADS had been repurchased for a total of 542.8 million USD. The operating cash flow amounted to a substantial 313.3 million USD in the second quarter and the company's cash on hand was 1.42 billion USD. For the third quarter, the company forecasts net revenues between 1.007 billion and 1.03 billion USD, which corresponds to growth between 18 and 21 percent year-over-year. Analysts, however, expect a higher consensus of 1.29 billion USD. In pre-market trading, EDU shares recently fell by 12.9 percent to 53.00 USD.