Early Childhood Education in Focus as Parents Return to Offices

By Liz Moyer

Investing.com -- Employers are increasingly asking workers to return to the office after Labor Day, for at least a few days a week if not all five, and that means young families will be scrambling for child care options.

Whether that translates into a boost for day care providers such as Bright Horizons Family Solutions Inc (NYSE:BFAM) is still an open question. The company has 1,014 early education and child care centers and the capacity for 114,000 children both in the U.S. and overseas in places such as the U.K. and India.

Like other educational centers, Bright Horizons was hit hard by the pandemic shutdowns but has come back. As of June 30, 98% of its child care centers were open.

The stock hit a new 52-week low on Thursday, and is down 46% this year. Analysts from Barclays, Deutsche Bank and Morgan Stanley all cut their price targets last month after earnings. Barclays' $90 target (lowered from $130) implies 33% growth from its current trading price of $67.61.

Rival child care operator KinderCare Education caters to children aged six weeks to 12 years in 1,498 centers with the capacity to serve 196,000 children. It is awaiting its initial public offering after filing papers for it in the spring – a second attempt to list publicly in the last year.

It said in its filing that since reopening post-pandemic, its same center occupancy increased to 67% as of April, representing 93% of pre-Covid occupancy.

Staffing has been another challenge for the early childhood education industry, as Bright Horizons CEO Stephen Kramer acknowledged in August. While enrollment is growing broadly, Bright Horizons can’t accommodate demand in some areas because of unfilled staff roles, particularly with younger age groups. It is seeing some progress and a pick-up in hiring lately.

Its growth in new enrollment is also picking up in some urban centers where it had been lagging, such as Washington, D.C., New York City and Seattle, Kramer told analysts last month.

Bright Horizons has lowered its enrollment expectations for the second half of this year “but we are confident that we will ultimately achieve full enrollment recovery,” Kramer said. 

Its revised 2022 revenue outlook is $2 billion and it forecasts adjusted EPS of $2.60 to $2.75 a share, which represents growth of 30% to 38%.