Capella Education Company
) third-quarter 2013 earnings of 48 cents a share surpassed the
Zacks Consensus Estimate of 40 cents by 20.0% on the back of
better-than-expected enrollment trends in the quarter.
Earnings climbed 23.1% from the year-ago quarter due to higher
year-over-year revenue and operating margins in the third
Revenues and Enrollments in Detail
Quarterly revenues of $100.7 million were ahead of the Zacks
Consensus Estimate of $100.0 million by 0.7%, Revenues inched up
1.4% from the year-ago levels due to tuition increase of 3% and
partly offset by grants and degree mix shift. The year-over-year
top-line growth slightly surpassed management's expectation of a
flat to up 1% growth.
Total active enrollment dropped 1.4% from the prior-year
quarter to 34,503 students. The decline was, however,
significantly lower than management's guidance of a decline in
the range of 2.0% to 4.0% due to improving persistent rates and
solid increase in new enrollments.
New enrollments declined 1.3% year over year versus a 12.7%
increase in the prior-year quarter. The new enrollment decline
was much lower than management's expectation of a mid to high
single-digit percentage decline.
Total enrollment declined 2.7% year over year for
Ph.D/doctoral degrees and 5.8% year over year for the Master's
programs. However, total enrollment for doctoral programs
improved sequentially. Total enrollment for the Bachelor's
programs grew 6.8%, resulting in the sixth consecutive quarter of
increase. The Other programs segment jumped 21.4% year over
Costs and Margins
Instructional cost of services decreased 3.0% to $45.9 million
in the third quarter of 2013. As a percentage of revenues,
instructional cost of services decreased 105 basis points (bps),
primarily due to lower bad debt expense.
Operating income went up 26.9% to $10.5 million, whereas
operating margin inflated 210 bps to 10.4% due to disciplined
cost management, lower depreciation expense and lower debt
expense. Operating margin exceeded management's expectation of a
range of 8% to 9% backed by cost management and
In August, Capella Education was approved by the Department of
Education for a competency based degree. The program focuses on
learning as opposed to meeting credit hour standards. Other
universities are applying for similar status. This movement may
help to reduce the cost of education and drive enrollments.
Fourth Quarter Outlook
For the fourth quarter of 2013, the company expects new
enrollments to decline in a mid to high single-digit percentage
range. Total enrollment is expected to dip 1.5% to 2.5% in the
Revenues are expected to decline 0.5% to 1.5% in the fourth
quarter of fiscal 2013. Operating margin is expected in the range
of 15% to 16% for the fourth quarter. The guidance reflects
volatility in the educational market environment..
Other Stocks to Consider
Capella carries a Zacks Rank #2 (Buy). Some other education
companies that are performing well are
New Oriental Education & Technology Group
TAL Education Group
). All of these stocks carry a Zacks Rank #1 (Strong Buy).
CAPELLA EDUCATN (CPLA): Free Stock Analysis
DEVRY INC (DV): Free Stock Analysis Report
NEW ORIENTAL ED (EDU): Free Stock Analysis
TAL EDUCATN-ADR (XRS): Free Stock Analysis
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