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Strayer Education Inc. Message Board

  • hageneriksson hageneriksson Feb 21, 2014 11:29 AM Flag

    I don't get it

    the conference call was absolutely desastrous with the company warning about much worse things yet to come. The stock seems to be up solely because of the huge bottom line beat which is absolutely irrelevant going forward.

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    • That's not it. It's b/c street incorrectly modeled a 20-40% effective tuition cut and associated op margin deleveraging, no incremental demand from the new pricing structure, lower persistency from the migration of hybrid students to online as part of the restructuring, and no appreciable mix shift. They were missing the 2012 term scholarships when estimating pro forma rev/student. The new rev/student guidance mgmt gave of -8% 2015 v. 2013 given by mgmt highlights the big discrepancy. Also, est's didn't take into account growing grad student mix which has higher rev/student also w/ better student persistency. Successful migration of students despite the campus closures suggests stra could migrate students from residual unprofitable campuses online. Finally, new enr during the q would have grown ~4.5% ex-the closures, which suggests the new tuition structure is successfully spurring demand. Less bad rev-student model reduction layered on $50mm+ run rate savings effective 1Q + stablizing enrollments could easily suggest 2015 eps above $4.00. Not very hard to do the new math.

      Re: company warning about much worse things yet to come, are you referring to the weather-related disruption? Some investors will look through that as 1x in nature.

      • 2 Replies to sorbusresearch
      • Strayer's first-quarter 2014 numbers were not too impressive. Revenue for the quarter was $116.5 million, a 15% drop from the same period of last year. Student enrollment at Strayer University for the 2014 spring term fell 10% to just over 41,000 compared to the 2013 spring-term enrollment of over 46,000. Its bad-debt expense as a percentage of revenue rose 4.3% compared to the same period in 2013. During this time, Strayer finished the last of its twenty planned location closures. Why did Strayer's stock bounce up so high?

        The answer here is that Strayer surpassed analysts' estimates. Strayer's earnings per share of $1.40 exceeded analysts' estimate of $1.29 in earnings per share by over 8%. Whether Strayer merits that much excitement because it exceeded expectations for this past quarter alone is debatable.

        Don't get me wrong--Strayer has some positives. As noted before, it closed twenty underperforming locations and it expects annual savings of $50 million in operating expenses from this. Its Jack Welch Management Institute graduate program grew by 39% this year, compared to the year before. Strayer was able to grow its institutional alliances and national accounts (corporate partnerships), with new students from this segment up 19% from the prior year.

        However, beyond the Jack Welch Management Institute, other units of Strayer have either been flat or declining. New students from institutional alliances and national accounts have not offset the overall decline in enrollments. Graduate enrollments outside of the Jack Welch Management Institute were flat. While Strayer has reduced its undergraduate tuition in order to become more affordable, that strategy has resulted in lower revenue per student, which is down 1.2% this year compared to the same time in 2013.

        Johnny Chen ( commenting on why Grand Canyon was the better stock. )

      • You sound like you actually know something. Are you long here?

 
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