American Public Education, Inc.
) reported third quarter 2012 earnings of 60 cents per share,
beating both the Zacks Consensus Estimate and prior-year
quarter's adjusted earnings (excluding an one-time tax benefit)
of 50 cents by 20%. Earnings were also significantly above the
guidance range of 46 cents - 51 cents. Cost savings banking on
the company's strategic initiatives made up for the modest
revenue growth, leading to the earnings beat.
Investments in information technology infrastructure to
support a larger and more diverse student population, automation
of Title IV processes and the ePress initiative have started to
show favorable results. These initiatives helped lower the costs
in the reported quarter. Further, American Public's fraud
prevention initiatives have been effective in reducing enrollment
of students who abuse funds, thereby reducing bad debt
Total revenue grew 18% year on year to $77.1 million. The rate
of increase was within management's expectation of a growth in
the range of 16% to 19%. Revenues slivered past the Zacks
Consensus Estimate of $77.0 million. The top-line growth was
driven by brisk student enrollments in the quarter, particularly
from civilian, military, and veteran students. Operating income
for the quarter increased 17% to $17.5 million.
Despite a challenging industry environment, American Public
has been consistently delivering positive growth in revenues,
earnings and enrollments. This is impressive given the fact most
of its peers have been witnessing consistent enrollment
Total enrollment increased 17% year over year to approximately
103,000; within the company's guidance of recording growth in the
region of 16% to 18%. New student enrollments grew only slightly
to approximately 24,000, almost in line with management
expectations of remaining flat with 2011 levels.
Management believes that the prior-year quarters may have
included enrollments of students who abused student aid. The
company's fraud prevention initiatives are reducing enrollment of
students who abuse funds, which explains the muted year-over-year
enrollment growth rates for the third quarter.
New Corporate Relationship
American Public Education is gradually shifting focus from
military personnel to public service segments of the civilian
market. The company is also entering into corporate and
government reationships, community college partnerships and
international opportunities to give it the necessary
diversification from volatile enrollment trends of active duty
American Public Education has established relationships with
Wal-Mart Stores, Inc.
Dollar General Corporation
ManTech International Corporation
) and others. In the quarter, American Public renewed its
partnership with Wal-Mart and plans to develop courses for their
Also in the quarter, American Public acquired a minority
interest in a joint venture, NWHW Holdings, Inc., which will
acquire New Horizons Worldwide, Inc., a global, independent
IT-training company. The partnership is aimed to attract
international students to American Public University (APU) by
working with New Horizons' international franchise centers and
building relationships with the latter's business customers like
) and many such big names.
Fourth-Quarter 2012 Outlook
Like always, American Public Education introduced its
financial guidance for the next quarter of 2012. The company is
expecting revenue growth in the range of approximately 9% to 13%
for the fourth quarter of 2012. Management now expects fourth
quarter 2012 enrollments to increase between 8% and 12% over the
prior-year period. New student enrolments are expected to decline
between 3% and 7%. Management further projects fourth quarter
2012 earnings between 64 cents and 67 cents a share.
Management noted that if registrations from students who
abused funds were excluded from the prior-year quarter figure,
the fourth-quarter 2012 new enrollment growth would have been up
8% to 9%.
For the full year, management issued a guidance range of
$2.25-$2.28. The Zacks Consensus Estimate stands at $2.24 per
The stock carries a Zacks #3 Rank in the near term ('Hold'
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