Strayer Education's Q2 Earnings & Rev Beat

Zacks

Strayer Education, Inc.’s (ESI) second-quarter 2013 earnings of $1.42 per share beat the Zacks Consensus Estimate of $1.38 by 2.9%. Earnings were also better than the company expected range of $1.37 – $1.39 per share. However, earnings declined by 23%, from $1.85 reported in the year-ago period due to top-line decline.

Total revenue in the quarter dropped 10% from the comparable prior-year quarter to $132.0 million due to lower enrollments. However, total revenue beat the Zacks Consensus Estimate of $131 million by 0.8%.

Quarter in Detail

Strayer University’s total enrollment for the 2013 summer term declined 13% to 38,627 students due to decline in both continuing student enrollments and new student enrollment. Continuing student enrollments went down 12% year over year while new student enrollments declined 17%. However, the company witnessed strong business in Jack Welch Management Institute, with the highest continuation rate in the University.  

Operating income in the quarter decreased 27.0% to $26.3 million. Despite lower costs in the quarter, operating margin contracted 480 basis points to 19.9% due to decline in revenues. Bad debt expense as a percentage of revenues was 4.3% in the second quarter, down 10 basis points from the prior-year quarter.

Other Financial Details

Strayer Education ended the quarter with cash and cash equivalents of $67.5 million as of Jun 30, 2013 compared with $50.8 million as of Mar 31, 2013. During the quarter, the company did not repurchase any stocks. As of Jun 30, 2013, the company had $70 million worth of stocks left under its share repurchase authorization.  

During the quarter, Strayer's business, management and accounting programs were accredited by the Accreditation Council for Business Schools and Programs (:ACBSP). Its master of education program is accredited by the Teacher Education Accreditation Council (:TEAC).

Outlook

Strayer Education expects solid business in third-quarter 2013 based on the total enrollment for the summer term of 2013. Revenue per student is expected to be flat for full year 2013.

Strayer Education carries a Zacks Rank #2 (Hold).

Some other education companies that are performing well are ATA, Inc. (ATAI), Capella Education Company (CPLA) and TAL Education Group (XRS). Both ATA and Capella carry a Zacks Rank #1 (Strong Buy), while TAL Education Group carries a Zacks Rank #2.

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