IDP Education Ltd (ASX: IEL) shares were trading strongly after the company announced a new share buyback and better-than-expected cost reductions in the business.
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Performing well despite a challenging backdrop
The company also said its earnings before interest and tax were expected to be marginally better than last year's $119 million, with the company expecting FY26 earnings to come in at $122 million.
This was due to "strong yield performance and cost reduction mitigating the impact of market conditions''.
IDP said regarding its cost-out program:
The company is executing on its transformation agenda to become a simpler, more agile and technology enabled business. Work to strengthen and simplify the business is progressing well. The company is now expecting a $30 million net reduction in the cost base in FY26, ahead of the $25 million target previously announced. As work on the next phase of the transformation progresses, additional cost reductions have been identified for FY27, which are expected to more than offset natural cost inflation. Further detail on the next phase of the multi-year transformation program will be provided at the company's results announcement on 10 August 2026.
IDP also announced a buyback of up to $50 million of its shares, which it said "reflects the company's robust balance sheet and strong cash generation''.
IDP shares were as high as $2.83 in early trade before settling back to be 11% higher at $2.66.
Shares still looking like good value
While the shares have appreciated significantly over the past two weeks, rising from around $2 in early June, the analyst team at Morgans believes the shares can go even higher.
In a recent research note to clients, the Morgans team said that, despite headwinds in some markets, visible in reduced visa applications, the company was still well-placed.
They said regarding the company:
We view IDP's earnings reset as cyclical rather than structural. Visa restrictions have tightened across all four key destination markets, compressing volumes materially, but underlying demand for international study remains supported by Asian demographics and IDP retains clear market leadership in both IELTS and student placement. Yield growth through the downturn speaks to genuine franchise pricing power. We see scope for earnings to stabilise and return to growth from FY27, led by the completed A$25m cost-out, China IELTS optionality and a stabilising placement backdrop as policy settings evolve.
Morgans said the valuation, at that time $2, was undemanding, and they had a price target on the shares of $3.15.
