Grand Canyon Education Inc.’s (LOPE) fourth-quarter 2013 earnings of 56 cents a share beat the Zacks Consensus Estimate of 52 cents by 7.7%. Earnings climbed 21.7% year over year due to solid revenue growth, strong operating margins and lower taxes.
Revenues and Enrollments in Detail
Quarterly revenues of $162.4 million beat the Zacks Consensus Estimate of $159 million by 2.1%. Revenues increased 15.0% from the year-ago levels due to a solid increase in total enrollment.
Total enrollment rose 14.1% from the prior-year quarter to 59,658 students, as both ground enrollment and online enrollment increased in double digits. Ground enrollment rose 32.6% to whereas online enrollment increased 10.9% in the quarter. New enrollment grew in low double digits.
The company has been witnessing strong enrollment growth on the back of low tuition cost, full time faculty, small class size and efficient service oriented counseling teams. The company’s career oriented programs have a steady demand among the students.
Grand Canyon Education reported a 37.7% increase in graduate degree enrollment to 22,476. Undergraduate enrollment increased 62.3% to 37,182.
Costs and Margins
Excluding state income tax, adjusted operating income went up 23.3% year over year to $43.4 million. Adjusted operating margin increased 180 basis points (bps) to 26.7% due to disciplined cost management, flattish depreciation and lower bad debt expense.
Instructional cost of services of $68 million in the fourth quarter of 2013 increased 15.6% year over year due to increased number of faculty members to support higher enrollment at the university. As a percentage of revenue, bad debt expense of 3.1% declined 10 basis points.
Full Year 2013
Grand Canyon Education’s full year 2013 earnings of $1.92 a share surpassed the Zacks Consensus Estimate of $1.88 by 2.0%. Earnings climbed 25.5% from the year-ago quarter due to solid revenue increase.
Beating the Zacks Consensus Estimate of $595 million by 0.6%, revenues of $598.3 million rose 17.0% from the year-ago levels due to higher enrollment.
For first quarter 2014, Grand Canyon Education expects net revenue of $165.0 million, operating margin of 24.7%; earnings per share of 51 cents, and student count of 60,200.
For second quarter 2014, the company expects net revenue of $154.5 million, operating margin of 22.5%, earnings per share of 43 cents and student count of 55,700.
For third quarter 2014, management projects net revenue to be $167.5 million, operating margin of 24.7%, earnings per share of 51 cents, and student count to be 66,400.
For fourth quarter 2014, the company expects net revenue of $181.0 million, operating margin of 27.5%, earnings per share of 62 cents and student count to be 66,200
Grand Canyon Education will introduce degree programs on information technology and computer science in the fall of 2014. The company intends to introduce degree programs in electrical, biomedical and mechanical for the fall of 2015. The company plans to expand its online campus by 6% to 8% per year.
Grand Canyon Education currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the education sector include Apollo Education Group, Inc. (APOL), New Oriental Education & Technology Group Inc. (EDU) and TAL Education Group (XRS). All these stocks carry a Zacks Rank #2 (Buy).
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