American Public Education Misses - Analyst Blog
May 11 2011 - 6:45AM
Zacks
American Public Education
Inc. (APEI), an online provider of higher education to
military and public service communities, recently delivered
lower-than-expected first-quarter 2011 earnings due to higher costs
and expenses. The quarterly earnings of 43 cents a share missed the
Zacks Consensus Estimate of 45 cents, but rose approximately 8%
from 40 cents earned in the prior-year quarter.
Management now projects
second-quarter 2011 earnings between 43 cents and 46 cents a share
that remains below the current Zacks Consensus Estimate of 48
cents. Following management’s projection, a negative sentiment may
be palpable among the analysts and we could witness a fall in the
Zacks Consensus Estimates in the coming days.
Total revenue of $58.7 million came
ahead of the Zacks Consensus Estimate of $57 million, and soared
24% from the prior-year quarter. American Public Education forecast
revenue growth of approximately 28% for second-quarter 2011.
Total net course registration
surged 31% to approximately 81,100, and net course registrations
from new students grew 37% to approximately 17,800. American Public
stated that about 90,600 students were enrolled in the American
Public University System as of March 31, 2011, reflecting an
increase of 33%.
Management now expects
second-quarter 2011 net course registrations to jump approximately
25%, and net course registrations from new students to rise
approximately 27%.
American Public Education has
predicted a growth in student enrollments for the second quarter,
despite the regulation proposed by the Department of Education that
may weigh upon students’ enrollments and the company’s profits.
The Department of Education cited
that an educational program could qualify for Title IV funds only
if it helps in achieving gainful employment, which includes the
criteria of loan repayment rate and debt-to-income ratios. The
company derives a major portion of its revenues from federal
student financial aid programs, the Title IV programs. The
education institutions are also under the scanner due to the rise
in the default rate of student loans.
A for-profit education company,
Capella Education Company (CPLA) cautioned that
new enrollment in second-quarter 2011 could plunge 40%. To counter
sluggishness in students’ enrollment, education companies are
restructuring their cost base. Capella said that it lowered its
headcount by about 120 non-faculty workforces and incurred a charge
of about $1.9 million for the same in the quarter. Management
hinted that the eliminations will result in cost savings of
approximately $12 million to $12.5 million per year.
Coming back to American Public
Education, first quarter operating income remained flat year over
year at $13.1 million, but operating margin contracted 550 basis
points to 22.3%.
American Public Education ended the
quarter with cash and cash equivalents of $96.5 million, and no
long-term debt. For the quarter, capital expenditures were $3.6
million and cash from operations was $19.9 million.
Currently, we have a long-term
“Neutral” rating on the stock. Moreover, American Public, which
competes with Apollo Group Inc. (APOL), holds a
Zacks #3 Rank, which translates into a short-term ‘Hold’
rating.
AMER PUB EDUCAT (APEI): Free Stock Analysis Report
APOLLO GROUP (APOL): Free Stock Analysis Report
CAPELLA EDUCATN (CPLA): Free Stock Analysis Report
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