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On Monday, BMO Capital Markets adjusted its outlook on KinderCare Learning Companies (NYSE:KLC), reducing the price target to $26 from the previous $31, but maintaining an Outperform rating for the company. The adjustment came after KinderCare reported a quarter that exceeded expectations in terms of adjusted EBITDA, largely due to effective management of selling, general, and administrative expenses (SG&A).
The company experienced its most significant growth in its Before and After School programs. Additionally, KinderCare’s Early Childhood Education (ECE) segment saw modest growth, which was attributed to strategic pricing adjustments and contributions from recent mergers and acquisitions. According to InvestingPro data, the company achieved 6.09% revenue growth in the last twelve months, though it operates with significant debt obligations. The management team expressed confidence in the ongoing support of the Child Care and Development Block Grant (CCDBG) program, which had been a concern for investors prior to the earnings release, potentially affecting the stock’s performance.
For the fiscal year 2025, KinderCare’s revenue guidance was in line with the higher end of market consensus. Notably, both the adjusted EBITDA and adjusted earnings per share (EPS) forecasts surpassed analyst expectations. In response to these results, BMO Capital raised its own estimates for the company.
Despite the positive performance and outlook, BMO Capital opted to lower its price target for KinderCare shares. This decision was based on the application of more current market multiples, which reflect the ongoing adjustments in the valuation of companies within the industry. KinderCare’s stock price will continue to be monitored as it responds to the new financial targets and market conditions.
In other recent news, KinderCare Learning Companies Inc. reported better-than-expected financial results for the fourth quarter of 2024. The company achieved earnings per share (EPS) of $0.09, surpassing the forecasted $0.05, which marks an 80% positive surprise. Additionally, KinderCare’s revenue slightly exceeded expectations, coming in at $647 million against a forecast of $645.42 million, reflecting a 5% increase year-over-year. The company’s net debt was significantly reduced from $1.38 billion to $864 million, indicating an improved financial position.
Looking ahead, KinderCare has provided guidance for 2025, projecting revenue between $2.75 billion and $2.85 billion, which suggests a 3-7% growth. The company expects adjusted EBITDA to range from $310 million to $325 million, with adjusted EPS guidance set between $0.75 and $0.85. Despite these positive financial results, the company’s stock experienced a decline in aftermarket trading, indicating potential investor caution.
In other developments, the company continues its strategic expansion, including opening new centers and acquiring existing ones, which contributed to its revenue growth. Analyst firms have not issued any recent upgrades or downgrades for KinderCare. The company remains focused on maintaining flat occupancy rates while opening 10-15 new centers in 2025. These recent developments reflect KinderCare’s ongoing efforts to strengthen its market position and financial performance.
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