Strayer Remains Neutral - Analyst Blog
June 22 2011 - 10:06AM
Zacks
A rich legacy of more than 119 years coupled with a strong focus
on working adults has enabled Strayer Education
Inc. (STRA) to establish a healthy position in the
for-profit post-secondary education industry. The company has been
consistently focusing on expanding educational programs, and is in
the midst of a rapid expansion plan and expects to open 8 new
campuses in 2011.
Strayer Education recently posted better-than-expected
first-quarter 2011 results. The quarterly earnings of $2.80 per
share beat the Zacks Consensus Estimate of $2.67 and jumped 6% from
$2.65 earned in the year-ago quarter due to the fall in share count
on account of a share buyback.
Total revenue for the quarter came in at $172 million,
marginally ahead of the Zacks Consensus Estimate of $171 million,
and grew 9% from the prior-year quarter, buoyed by a rise in
enrollment and a 5% increase in tuition fees, effective January
2011.
The educational institute said that total enrollment for the
2011 spring term was 55,974 students compared with 55,970 in the
same term last year.
Strayer Education is a prominent player in the for-profit
post-secondary education industry. The company’s sustained effort
to expand educational programs and to open new campuses has helped
boost enrollment and, in turn, the top-line.
However, the current potential risk looming over the education
sector is the regulation proposed by the Department of Education
that may weigh upon students enrollments and the company's profits.
The Department of Education proposed that an educational program
could only qualify for Title IV funds, 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.
We observe that Strayer Education is witnessing a fall in
students’ enrollment. After increasing 4% in fourth-quarter 2010,
the company witnessed a drop of 0.1% in campus-based students in
first-quarter 2011. Moreover, the rate of growth in online students
falls to 1%, following a 10% increase in the previous quarter. The
company also informed that new student enrollment dropped 19%.
Another for profit education company, Capella Education
Company (CPLA) cautioned that new enrollment in
second-quarter 2011 is expected to tumble by 40%. To counter
sluggishness in students’ enrollment, education companies are
resorting to 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.
Currently, we have a long-term ‘Neutral’ rating on the stock.
Strayer Education, which competes with Apollo Group
Inc. (APOL) and Corinthian Colleges Inc.
(COCO), holds a Zacks #3 Rank, which translates into a short-term
Hold’ recommendation that correlates with our long-term view.
APOLLO GROUP (APOL): Free Stock Analysis Report
CORINTHIAN COL (COCO): Free Stock Analysis Report
CAPELLA EDUCATN (CPLA): Free Stock Analysis Report
STRAYER EDUC (STRA): Free Stock Analysis Report
Zacks Investment Research
Apollo Education Group, Inc. (NASDAQ:APOL)
Historical Stock Chart
From Jun 2024 to Jul 2024
Apollo Education Group, Inc. (NASDAQ:APOL)
Historical Stock Chart
From Jul 2023 to Jul 2024