A month has gone by since the last earnings report for American Public Education (APEI). Shares have lost about 2.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is American Public Education due for a breakout? 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 (APEI) Q3 Earnings Beat Estimates, Down Y/Y
American Public Education, Inc. reported better-than-expected results in third-quarter 2019. Both the top and bottom lines outpaced the Zacks Consensus Estimate. However, both the metrics declined year over year due to lower contribution from its segments.
During the quarter under review, the company reported adjusted earnings of 11 cents per share, surpassing the consensus estimate of 1 cent. However, the reported figure decreased 66.7% on a year-over-year basis.
Total revenues during the quarter totaled $67.89 million, which topped the consensus mark of $66.5 million by 2.1% but declined 7% from the year-ago period. Lower contribution from the Hondros College of Nursing (“HCN”) and APEI segments negatively impacted the results.
Segment-wise, APEI’s revenues of $61.2 million fell 4.1% from the year-ago period. The downside was due to temporary exhaustion of Navy TA program funds during the quarter. Within the APEI segment, American Public University System’s (“APUS”) student enrollment as of Sep 30, 2019 declined 2% from the comparable year-ago period to 80,700. During the quarter, total net course registration fell 5% from the year-ago quarter to 76,700. Net course registrations by new students also declined 5% from the prior-year quarter to 10,800.
At HCN, revenues decreased 26.8% year over year to $6.7 million owing to reduced enrollments. Total and new student enrollment in HCN also dropped 29% from the prior-year quarter to 1,410 and 345 students, respectively.
Since Jan 1, 2019, the APEI segment started charging HCN for the value of courses taken by employees at APUS. During the quarter, inter-segment elimination totaled $25 million.
Total costs and expenses during the quarter increased 7.1% year over year. Instructional costs & services expenses, as a percentage of revenues, decreased 155 basis points (bps) to 38.6%. However, selling & promotional expenses — as a percentage of revenues — increased 400 bps. General and administrative expenses, as a percentage of revenues, also increased 600 bps.
As of Sep 30, 2019, the company had total cash and cash equivalents of approximately $210.1 million compared with $212.1 million at the end of 2018. Capital expenditure totaled $4.2 million in the first nine months of 2019 compared with $5.3 million in the comparable year-ago period.
Cash flow from operations was $31.9 million in the quarter, up 25% from $25.6 million reported in the prior-year period.
During the reported quarter, the company repurchased 638,620 shares of common stock. It has $7.7 million shares remaining under the repurchase authorization.
Fourth-Quarter 2019 Guidance Bleak
The company expects total revenues to decline within 3-7% from a year ago. It anticipates earnings between 35 cents and 40 cents per share, indicating a significant decline from the year-ago reported figure of 55 cents.
Net course registrations at APUS are expected between a 2% decrease and 2% increase year over year. Registrations by new students are anticipated between a 1% decline and 3% growth from the year-ago quarter.
At HCN, total and new student enrollment is likely to decline 20-24% from the year-ago quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 7.35% due to these changes.
Currently, American Public Education has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, American Public Education has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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