American Public Education (APEI) Up 35.6% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for American Public Education (APEI). Shares have added about 35.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is American Public Education due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
American Public Q3 Earnings & Revenue Beat Estimates
American Public delivered strong earnings in third-quarter 2023. The bottom line handily surpassed the Zacks Consensus Estimate on the back of contributions from the American Public University System (“APUS”), Hondros College of Nursing segment (“HCN”) and Graduate School ("GSUSA").
Revenues also beat the analysts’ expectations and jumped year over year.
Delving Deeper
The company reported adjusted earnings of 2 cents per share versus the consensus mark of a loss of 25 cents.
Total revenues of $150.8 million topped the consensus mark of $149.2 million by 1.1% and inched up 0.9% from the year-ago period’s levels. Solid performance across the business segments (barring the Rasmussen University (“RU”) unit) bode well.
Total costs and expenses decreased 4.1% year over year to $144.4 million. A decline in advertising, depreciation and amortization and marketing support material costs, partially offset by a rise in technology costs, bad debt expenses and employee compensation costs in the APUS and HCN segments, supported the decline.
Adjusted EBITDA increased 91.4% year over year to $18.1 million. Adjusted EBITDA margin of 12% expanded 570 bps year over year.
Segment Discussion
APUS: Revenues of $76.4 million rose 11% from the year-ago period’s levels of $68.7 million. The increase was primarily due to a 7.6% increase in net course registrations and tuition and fee increases implemented in April and July.
APUS’ total net course registration increased by 8% from third-quarter 2022 to 92,300. In the quarter, military registrations were up 12% and veteran students’ registrations rose 5%. Adjusted EBITDA margin of 30.4% expanded from 20.5% year over year.
RU: The segment reported revenues of $52.1 million for the quarter, down 15% from $61.5 million reported a year ago. This was due to a 10% fall in total student enrollment, partially offset by an increase in the tuition of certain programs implemented in January 2023.
RU’s total student enrollment fell to 13,500 due to a 19% decline in nursing and a 4% decrease in non-nursing enrollment. Adjusted EBITDA margin of negative 10.3% widened from negative 3.1% reported in the prior year.
HCN: Segment’s revenues rose 20% year over year to $13.7 million. The increase was backed by growth in total student enrollment and tuition fees (implemented during the second quarter).
Total student enrollment at HCN increased 17% from the prior-year quarter’s levels to 2,800. Adjusted EBITDA margin of negative 2.4% improved by 760 bps year over year.
GSUSA revenue increased 10% year over year to $8.6 million. This was included in Corporate and Other.
Financials
At the end of the third quarter, American Public had total cash and cash equivalents of $155.2 million from $129.6 million at the 2022-end.
Q4 Guidance
APEI expects total revenues to fall between -2% and -1% year over year to $149.3-$151.3 million.
It anticipates adjusted earnings of 7-15 cents per share versus a loss of 27 cents reported a year ago.
Adjusted EBITDA is expected to be within $14.9-$16.9 million, suggesting a decline of 3% to growth of 10% year over year.
APUS’ total net course registrations are likely to be 88,900-90,700, reflecting growth of 2-4% year over year.
HCN’s total enrollment is expected to increase 19% from the prior year’s figure to an all-time high of 3,100 students.
RU’s student enrollment will likely fall 10% from the year-ago quarter’s figure to 14,100. Nursing student enrollment is likely to decline 25% to 5,700, while non-nursing student enrollment is expected to rise 5% to 8,400 year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 383.33% due to these changes.
VGM Scores
Currently, American Public Education has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise American Public Education has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
American Public Education is part of the Zacks Schools industry. Over the past month, Adtalem Global Education (ATGE), a stock from the same industry, has gained 7.2%. The company reported its results for the quarter ended September 2023 more than a month ago.
Adtalem reported revenues of $368.85 million in the last reported quarter, representing a year-over-year change of +4%. EPS of $0.93 for the same period compares with $0.88 a year ago.
Adtalem is expected to post earnings of $1.01 per share for the current quarter, representing a year-over-year change of -13.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -2.9%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Adtalem. Also, the stock has a VGM Score of A.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
American Public Education, Inc. (APEI) : Free Stock Analysis Report
Adtalem Global Education Inc. (ATGE) : Free Stock Analysis Report
