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Will Enrollments Aid Strategic Education (STRA) Q3 Earnings?

Zacks Equity Research

Strategic Education Inc. or SEI STRA is scheduled to report third-quarter 2019 results on Nov 7, before the opening bell.

In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 8.2% and 1.7%, respectively. Earnings and revenues of this for-profit education company grew by a solid 82.8% and 113.8%, respectively, from the year-ago reported figures on the back of strong top-line growth across its segments, given higher enrollment.

Markedly, SEI reported better-than-expected earnings in all the last four quarters, with the average surprise being 14.3%.

Trend in Estimates

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been unchanged at $1.25 over the past seven days. The estimated figure indicates an increase of 35.9% from 92 cents per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $237 million, suggesting 47.3% growth from the year-ago reported figure of $161 million.

Strategic Education Inc. Price and EPS Surprise

Strategic Education Inc. Price and EPS Surprise

Strategic Education Inc. price-eps-surprise | Strategic Education Inc. Quote

Factors to Consider

SEI is expected to have recorded solid third-quarter earnings on the back of strong enrollment, along with convenient, accessible and flexible educational programs. Its focus on non-degree programs is also likely to have boosted enrollment and revenues at both universities — Strayer and Capella.

Both Strayer and Capella University’s educational programs are most suitable for working adults as these are designed in a convenient, accessible and flexible manner to meet their needs. The universities offer weekend and evening courses, as well as online educational courses that are well suited for the work-day schedules of adults. These career-oriented easy-to-access programs are likely to have reflected in the company’s enrollment growth.

Meanwhile, at Capella, FlexPath — accounting for 31% of enrollment in the university's Bachelor and Master's degrees — is expected to have delivered a stellar performance in the third quarter.

However, lower revenue per student within Strayer University due to excessive use of scholarships and ongoing mix shift to lower-paying corporate-sponsored students might have hurt the company’s overall performance to some extent.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for SEI this time around. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive surprise. This is not the case here, as you will see below.

Earnings ESP: SEI has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some Consumer Discretionary stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Lululemon Athletica Inc. LULU has a Zacks Rank #2 and an Earnings ESP of +1.54%.

Twin River Worldwide Holdings, Inc. TRWH has a Zacks Rank #2 and an Earnings ESP of +13.25%.

Spectrum Brands Holdings Inc. SPB has a Zacks Rank #3 and an Earnings ESP of +2.60%.

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