New Oriental Education: Anticipating A Q4 Results Beat (Rating Upgrade)

Core Viewpoint - New Oriental Education & Technology Group Inc. (EDU) is expected to report better-than-expected Q4 FY 2024 financial results, leading to an upgrade in stock rating from Hold to Buy [1][6]. Financial Performance Expectations - Analysts project a 32% year-over-year revenue growth for EDU, reaching $1.14 billion in Q4 FY 2024, with normalized earnings per share (EPS) expected at$0.45 [2]. - The anticipated bottom line growth is expected to accelerate from 13% YoY in Q3 FY 2024 to 21% YoY in Q4 FY 2024 [2]. Predictions for Q4 Results - The company is likely to exceed its own guidance for learning center growth, with a potential increase of over 30% in capacity for FY 2024 [3]. - EDU's learning center network may have grown by 34% YoY, surpassing 1,000 centers by the end of May 2024, which would indicate a 10% quarter-over-quarter increase [4]. Operating Leverage and Marketing Costs - Positive operating leverage is expected to enhance profitability, with G&A costs increasing by 34% YoY in Q3 FY 2024, significantly lower than the 60% YoY surge in revenue [4]. - Marketing costs related to the livestreaming e-commerce business, East Buy, are anticipated to normalize in Q4 FY 2024, following a 57% YoY increase in Q3 FY 2024 [4]. Valuation Metrics - EDU's current Price-to-Earnings Growth (PEG) ratio is calculated at 0.74 times, indicating undervaluation compared to the fair valuation benchmark of 1 times [6].