Franklin Covey, a training and consulting services provider, posted a lower-than-expected fiscal 2Q (ended Feb. 28) loss driven by margin expansion and cost management. Meanwhile, net sales for the quarter missed analysts’ expectations. Shares declined almost 5% in Thursday’s extended trading session after closing 3.8% higher on the day.
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Franklin Covey’s (FC) 2Q net loss came in at $0.00 per share, compared to the loss of $0.18 per share estimated by analysts. The company reported EPS of $0.08 in the prior-year period.
Net sales of $48.2 million missed the Street’s estimates of $48.62 million and decreased 10.2% from the year-ago period, negatively impacted in certain areas by the ongoing COVID-19 pandemic.
The company’s All Access Pass (AAP) sales increased 13% year-over-year, while billed and unbilled deferred subscription revenue surged 16%. Operating expenses declined 6.5%. Additionally, adjusted gross margin was 77.5%, up from 71.9% reported in the prior-year quarter. (See Franklin Covey stock analysis on TipRanks)
Franklin Covey CEO Bob Whitman said, “In the coming quarters and years we expect three factors to continue to drive significant growth in subscription and related sales and profitability. First: driven by growth in All Access Pass, we expect substantially all the Company’s sales to be subscription and subscription-related within 3-4 years; second: we expect the already significant lifetime customer value of our All Access Passholders to continue to increase; and third: we expect the volume of new All Access Pass logos to grow significantly as we continue to aggressively grow our sales force and licensee network.”
On March 30, Barrington analyst Alexander Paris reiterated a Buy rating and a price target of $30 on the stock as he believes that the company has “the worst of the pandemic behind it and a recovery in revenue and earnings ahead, particularly in the second half.” Furthermore, “the company is well positioned” as “trends in fashion athletic footwear are strong and will remain that way,” Paris added.
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 2 Buys. The average analyst price target of $30 implies 2.2% upside potential to current levels. Shares have surged almost 31% so far this year.
Franklin Covey scores a 9 of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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