Strategic Education Inc. or SEI STRA is scheduled to report fourth-quarter 2018 results on Mar 1, before the opening bell. In the last reported quarter, the company’s adjusted earnings of 92 cents beat the Zacks Consensus Estimate by 29.6%. Moreover, its bottom line jumped by an impressive 187.5% from the year-ago period.
SEI’s total third-quarter revenues also improved 48.3% from a year ago to $160.9 million. Meanwhile, adjusted revenues or revenues excluding deferred revenue adjustment increased 72.5% from the prior-year quarter to $187.2 million.
Earnings & Revenue Expectation
Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.
The Zacks Consensus Estimate calls for SEI’s fourth-quarter revenues to increase 99% from the year-ago level to $236.2 million. The consensus estimate for earnings is pegged at $1.51 per share, implying growth of 38.5% on a year-over-year basis.
Let’s See How Things are Shaping Up for This Announcement
SEI is likely to benefit from strong enrollment, along with convenient, accessible and flexible educational programs during the fourth quarter. Its focus on non-degree programs are likely to boost enrollment and revenues.
Both of its segments, Strayer and Capella, posted higher enrollments during third-quarter 2018. Total enrollment at Strayer grew 9% year over year, marking the highest growth rate for the university since 2010, while that of Capella increased 2% with just 38,000 learners. Meanwhile, Strayer’s new student enrollment increased 11.9% and Capella reported 13.2% year-over-year growth.
Both Strayer and Capella University’s educational programs are most suitable for working adults as they are designed in a convenient, accessible and flexible manner to meet their needs. It offers 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 help students choose a career of their choice.
The company keeps on adding different institutions in order to advance overall growth. In 2016, SEI acquired New York Code and Design Academy (NYCDA) to capitalize on the demand surge. The NYCDA provides professional training to develop web and mobile apps. The introduction of web and mobile app development courses appealed to students who intend to upgrade their skills to match the job-market demand, in turn significantly contributing to the company’s top line.
The company also acquired Hackbright Academy, a provider of non-degree software engineering. The acquisition enabled the company to capitalize on strong demand in software, engineering and coding markets. These new programs focus on bridging the gap between skills required and the skill-set offered by the workforce. Therefore, introduction of such programs appeals to working adults as well as employers, thereby driving the company’s top line. Notably, revenues in the Non-Degree Programs segment got doubled in the last reported quarter, backed by higher revenues from DevMountain, Hackbright Academy and Sophia.
However, declining revenue per student for Strayer University has been a concern for the company. In fact, in the last reported quarter, Strayer University’s revenue per student declined 2% from a year ago due to lower tuition levels and continued mix shift to undergraduate students who have slightly higher drop rates. The company expects fourth-quarter revenue per student to remain the same as it was in the third quarter. Revenue per learner at Capella University is expected to be flat year over year.
What the Zacks Model Says
Our proven model shows that SEI is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +13.66%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: SEI currently carries a Zacks Rank #1.
Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Stocks With Favorable Combination
Here are some other Consumer Discretionary stocks that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat in the upcoming releases:
PlayAGS, Inc. AGS has an Earnings ESP of +42.86% and a Zacks Rank #1.
Live Nation Entertainment, Inc. LYV has an Earnings ESP of +2.41% and holds a Zacks Rank #1.
SeaWorld Entertainment, Inc. SEAS has an Earnings ESP of +13.92% and a Zacks Rank #3.
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