Capella Education Company
) second quarter 2013 earnings of 83 cents a share surpassed the
Zacks Consensus Estimate of 66 cents by 25.8% on the back of
better-than-expected new enrollment and total enrollment in the
However, earnings declined 2.4% from the year-ago quarter due
to year-over-year decreases in revenues and margins.
Better-than-anticipated new enrollment growth and total
enrollment, however, could not offset the year-over-year downward
drift in earnings.
Revenues and Enrollments in Detail
Quarterly revenues of $103.7 million were ahead of the Zacks
Consensus Estimate of $102.0 million by 1.7%, driven by new
enrollment growth. Revenues slipped 2.3% from the year-ago levels
due to total enrollment decline. The year-over-year top-line
decline was also lower than management's expectation of a 3.0% to
Total active enrollment dropped 0.9% from the prior-year quarter
to 36,003 students. The decline was however significantly lower
than management's guidance of a 2.0% to 3.0% decline due to
improving persistent rates and solid increase in new
New enrollments grew 12.7% year over year versus an 8.2%
increase in the prior year quarter, far exceeding management's
expectation of sequentially flat results. New enrollments
benefited from double-digit percentage growth in all degrees.
Total enrollments declined 3.3% year over year for Ph.D./doctoral
degrees and 5.7% for the Master's programs. However, total
enrollment for both doctoral and masters programs improved
sequentially. Total enrollments for the Bachelor's programs grew
8.8%, resulting in the fifth consecutive quarter of increase. The
Other segment jumped 28.9% year over year.
Costs and Margins
Instructional cost of services decreased 3.9% to $44.9 million in
the second quarter of 2013. As a percentage of revenues,
instructional cost of services decreased 70 basis points,
primarily due to lower bad debt expense.
Operating income came down 3.3% to $17.5 million, whereas
operating margin contracted 20 basis points to 16.8% due to
strong comparison in the prior year quarter. However, operating
margin exceeded management's expected range of 13.0% to 14.0% on
the back of better-than-expected revenue performance and cost
For the third quarter of 2013, the company expects new
enrollments to decline in a mid- to single-digit percentage
range. Total enrollment is expected to dip 2% to 4% in the
Revenues are expected to remain flat to up 1% in the third
quarter of 2013. Operating margin is expected to be in the range
of 8% to 9% for the third quarter.
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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 them carry Zacks Rank #1.