October 20, 2009 / 10:42 AM / 10 years ago

UPDATE 2-New Oriental Q1 lags market, shares fall

* Q1 profit $1.47/ADS vs. est. $1.57/ADS

* Q1 rev $149.4 mln vs. est. $154.6 mln

* Sees Q2 rev $60.8-$62.8 mln

* Shares fall as much as 14 percent (Recasts; Adds details, updates share movement)

BANGALORE, Oct 20 (Reuters) - China’s New Oriental Education and Technology Group Inc (EDU.N) posted lower-than-expected quarterly results as enrollments were hurt by the H1N1 flu pandemic, sending its shares down as much as 14 percent.

The company, which offers English language instruction and test preparation for English language exams, said it expects second-quarter enrollments to continue to be hurt by fears of the H1N1 flu.

New Oriental forecast second-quarter revenue between $60.8 million to $62.8 million.

Analysts were expecting revenue of $62 million for the period, according to Thomson Reuters I/B/E/S.

The company’s revenue growth is likely seeing some impact from increased competition in the Chinese market, Signal Hill’s analyst Jeff Lee said.

New Oriental launched a new learning program offering one-to-one tutoring and small class-size tutoring for 6-year to 18-year old students, in the first quarter.

Competition will be tougher in areas like middle or high school test preparations where the company has a less developed brand, analyst Brandon Dobbell from William Blair & Co said.

Increased competition will mean that the company will have to spend more money on marketing, particularly in the big cities where the majority of its businesses are, he added.

FIRST-QUARTER RESULTS

For the first quarter ended Aug. 31, the company posted earnings of $57.1 million, or $1.47 per American Depositary Share (ADS), compared with $44.9 million, or $1.17 per ADS, a year earlier.

Revenue rose 26 percent to $149.4 million.

Analysts on average were expecting earnings of $1.57 a share on revenue of $154.6 million.

“We estimate that the H1N1 flu pandemic negatively impacted our top line growth by 2-4 percent with a more significant negative percentage impact on our bottom line for the quarter,” the company said in a statement.

Shares of the company fell as much as 14 percent to $70.11 before paring some losses to trade down $8.73 at $72.57 Tuesday afternoon on the New York Stock Exchange. (Reporting by Amulya Nagaraj in Bangalore; Editing by Maju Samuel and Unnikrishnan Nair)

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