American Public Beats Estimate - Analyst Blog
November 08 2011 - 8:45AM
Zacks
American Public Education
Inc. (APEI), an online provider of higher education to
military and public service communities, recently delivered
better-than-expected third-quarter 2011 results on the heels of
robust student enrollments. The quarterly earnings of 60 cents a
share beat the Zacks Consensus Estimate of 42 cents, and rose
twofold from 30 cents earned in the prior-year quarter.
Management now projects
fourth-quarter 2011 earnings between 58 cents and 60 cents a share
that dovetails with the Zacks Consensus Estimate of 59 cents.
Total revenue of $65.3 million,
surged 35% from the prior-year quarter, and also came ahead of the
Zacks Consensus Estimate of $63 million. American Public Education
forecast a revenue growth of approximately 29% for the fourth
quarter of 2011.
Total net course registration
soared 32% to approximately 87,300, and net course registrations
from new students grew 53% to approximately 23,900. American Public
stated that about 105,700 students were enrolled in the American
Public University System as of September 30, 2011, reflecting an
increase of 36%.
Management now expects
fourth-quarter 2011 net course registrations to soar approximately
28%, and net course registrations from new students to rise
approximately 29%.
American Public Education has
predicted growth in student enrollments for the fourth 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.
Another for-profit education
company, Capella Education Company (CPLA)
cautioned that new enrollment in fourth-quarter 2011 is expected to
tumble by approximately 10%. To counter sluggishness in students’
enrollment, education companies are resorting to restructuring
their cost base.
Coming back to American Public
Education, operating income for the quarter under review surged 61%
to $15 million, whereas operating margin expanded 370 basis points
to 23%.
American Public Education ended the
quarter with cash and cash equivalents of $107.3 million and no
long-term debt. For the first nine months ended September 30, 2011,
cash from operations was $47.5 million and capital expenditures
were $13.8 million.
American Public Education’s focus
on serving military and public service personnel, high student
referral rates and accreditation enable it to consistently deliver
impressive top and bottom lines. The company’s sustained effort to
expand educational programs helps boost enrollments.
The company is now primarily
focusing on increasing net registrations from civilian students, to
safeguard itself from the adverse impact of a fall in military
registrations due to increased military operations. Further,
American Public’s debt-free balance sheet and healthy cash reserves
augur well for future operating performance.
Currently, we have a long-term
‘Outperform’ rating on the stock. However, American Public, which
competes with Apollo Group Inc. (APOL), holds a
Zacks #4 Rank, which translates into a short-term ‘Sell’
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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