Pre-earnings brief
Reports
Tue, Feb 22, 2022
Est. EPS
—
Est. revenue
—
Implied move
±3.1%
EPS beat rate
63%
New Oriental Education & Technology Group Inc. (EDU) is a leading provider of educational services in China, focusing on language training and test preparation. As a key player in the consumer discretionary sector, the company is influenced by trends in education spending and regulatory changes in the Chinese market.
Last quarter
In the last quarter, New Oriental reported an EPS of $0.55, exceeding expectations by nearly 28%. The stock reacted positively, gaining over 15% the following day.
Management promises and guidance
EPS beat streak
3Q
EPS beat rate
63%
Avg EPS surprise
+14.58%
Avg 1-day reaction
-3.40%
Overall, investors are cautiously optimistic ahead of the earnings report, hoping for continued growth in EPS and revenue.
Bull case
If New Oriental can demonstrate strong enrollment growth and effective cost management, it could lead to significant upside in its stock price.
Bear case
Conversely, any signs of declining enrollment or increased regulatory pressures could lead to a negative reaction from the market.
The print will turn on these.
Q1
What are the current enrollment numbers compared to last quarter?
Enrollment figures are a direct indicator of demand for New Oriental's services and will heavily influence investor sentiment.
Q2
How is the company addressing regulatory changes in the education sector?
Regulatory pressures have impacted the education industry in China, and clarity on this issue will be crucial for future growth prospects.
—
Est. EPS
—
Est. Rev
—
Impl. Move
—
Why consensus could be wrong
The market may be underestimating the resilience of New Oriental's enrollment numbers despite regulatory pressures, as the company has shown adaptability in previous quarters.
Supporting evidence
The recent EPS surprise of +27.91% indicates stronger-than-expected performance.
Options pricing suggests a lower expected move, which may not reflect the company's potential for growth.
Past performance shows that the company has consistently beaten EPS estimates, suggesting a trend that could continue.
Key risk
If enrollment numbers come in significantly lower than expected, it could undermine the positive sentiment around the stock.
Pre-commit to what would confirm each case.
The core debate this quarter revolves around enrollment trends and regulatory challenges, which are critical for future growth.
Bull confirmed if
Demonstrating enrollment growth of at least 10% year-over-year would confirm the bull case.
Bear confirmed if
A decline in enrollment numbers or negative commentary on regulatory impacts would confirm the bear case.
What the market is pricing for the move.
Implied Move
±3.06%
Historical Avg
±8.56%
The options market is pricing in a modest move of about 3.06%, suggesting that investors expect some volatility but not a dramatic shift in stock price.
Options are pricing a smaller move compared to the historical average of 8.56%, indicating a potentially undervalued setup.
ATM IV
0.5%
30d HV
27.0%
Likely market behavior by outcome. Not investment advice.
Beat & raise
If New Oriental beats expectations, history suggests the stock could rise by around 1.74%, confirming a positive outlook.
In line / cautious
An in-line result with cautious management commentary may lead to a muted response, reflecting uncertainty in the market.
Miss
If the company misses expectations, history suggests a potential decline of about 11.96%, indicating significant market disappointment.
The lines on the call that would change the story.