Key Takeaways:
New Oriental Education & Technology Group (9901.HK) shares fell 3.8 percent in Hong Kong trading after the company reported third-quarter results that beat analyst estimates but pointed to near-term restructuring costs.
“We are pleased to see that after several consecutive quarters of revenue growth exceeding expectations, this quarter has once again surpassed expectations,” Stephen Yang, Executive President and Chief Financial Officer, said on the earnings call. “This reinforces our confidence in the correctness of our strategy and our optimism about future performance.”
The Beijing-based educational services provider posted net revenue of $1.42 billion for the quarter ending February 28, a 19.8 percent increase from the prior year. GAAP net income attributable to New Oriental jumped 45.3 percent to $126.8 million. On an adjusted basis, which excludes stock-based compensation, net income was $152.2 million, a 34.3 percent year-over-year gain.
Looking ahead, New Oriental raised its full-year revenue guidance for fiscal 2026 to a range of $5.56 billion to $5.60 billion, implying annual growth of 13 to 14 percent. For the current fourth quarter, it projects revenue between $1.43 billion and $1.47 billion. However, management also disclosed plans for a one-off restructuring expense of $10 million to $15 million in Q4 related to the consolidation of its overseas business units, which is expected to drag on margins by 50 to 100 basis points.
The company’s top-line growth was driven by its newer business lines and a recovery in its traditional segments. Revenue from new education initiatives, including non-academic tutoring and intelligent learning devices, grew 23 percent year-over-year. The adults and university student business also saw a 15 percent revenue increase. In its legacy overseas segment, test preparation revenue increased 7 percent, though the study consulting business declined by approximately 4 percent amid what management called external economic headwinds.
New Oriental is also piloting a new "family full life-cycle" model called New Oriental Home, which integrates its education, e-commerce, and tourism offerings into a single platform. The program is currently active in 12 cities with over 330,000 registered families.
The company continued its shareholder return program, repurchasing 3.3 million American Depositary Shares (ADS) for approximately $184.3 million as of April 21. New Oriental will also pay the second installment of its fiscal 2026 dividend, $0.60 per ADS, in June.
The upcoming restructuring of the overseas business is intended to improve efficiency and support margin growth in the next fiscal year. "We hope to get a better margin step by step in the next three years, and even long term," Yang stated, signaling a multi-year ambition for profitability improvement. Investors will be watching the fourth-quarter results to assess the impact of the restructuring and the continued momentum in its diversified business lines.
This article is for informational purposes only and does not constitute investment advice.
