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Strayer Education Hits 52-Week High on Improved Enrollments

Zacks Equity Research

Share price of Strayer Education, Inc. (STRA) reached a fresh 52-week high of $61.26 on Aug 19.

Share price has been rising ever since the company announced solid second-quarter fiscal 2014 results on July 31. Most encouragingly, new enrollment levels improved in the quarter and management expects total enrollment levels to rebound in 2015.

Shares of the Washington, DC-based education company eventually closed at $60.53, yielding a solid year-to-date return of 78.7%. Strayer Education has, in fact, reported an increase in new enrollment levels and expects total enrollment levels to rebound in 2015.

Growth Drivers

Despite a year-over-year decline, Strayer Education’s second-quarter 2014 adjusted earnings of $1.29 per share beat the Zacks Consensus Estimate by 3%. We believe that the earnings beat was driven by solid margin, lower share count and lower bad debt expenses in the quarter.

Though quarterly total revenue continued to decline year over year due to lower total enrollment, an increase in new enrollment level for the second consecutive quarter was encouraging.

Strayer has been witnessing weak total enrollment trends due to continued unemployment, overall economic downturn and a subsequent decline in student demand. However, the company has been taking several initiatives to drive new enrollments. This includes a 20% cut in tuition rates of undergraduate students for the winter term of 2014.

The company also introduced the Graduation Fund in mid-2013, which offers one free course for every three programs completed successfully. These initiatives have led to higher new enrollments in the last two quarters.  

This positive trend in new enrollment is likely to continue in the upcoming quarters, which should eventually improve total enrollment levels. In fact, the company expects total enrollment to turn positive in the second quarter of 2015 on the back of the current new enrollment trends. Quarterly revenue in 2015 is expected to turn positive 2 to 3 quarters later.

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

Other Stocks to Consider

Investors interested in the education sector may consider stocks like Capella Education Co. (CPLA), GP Strategies Corp. (GPX) and Grand Canyon Education, Inc. (LOPE), all carrying a Zacks Rank #2 (Buy).

Read the Full Research Report on STRA
Read the Full Research Report on CPLA
Read the Full Research Report on LOPE
Read the Full Research Report on GPX


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