On Sep 3, Zacks Investment Research upgraded
Capella Education Company
) to Outperform following solid second quarter 2013 results
released on Jul 23.
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Why the Upgrade?
A provider of online post-secondary education services, Capella
surpassed the Zacks Consensus Estimate for both revenue and
earnings in the second quarter of 2013. Though the company's
earnings of 83 cents declined 2.4% year over year, it surpassed
the Zacks Consensus Estimate of 66 cents by 25.8% on the back of
better-than-expected enrollment growth in the quarter.
Revenues of $103.7 million beat the Zacks Consensus Estimate of
$102.0 million by 1.7% in second quarter 2013. Year over year
revenue decline of 2.3% was better than management's expectation
of a 3.0% to 4.0% decline, given better-than-expected enrollment
Total active enrollment decline of 0.9% from the prior-year
quarter was significantly lower than management's guidance of a
decline of 2.0% to 3.0% due to improving persistent rates and
solid increase in new enrollments.
New enrollments grew 12.7%, far exceeding management's
expectation of sequentially flat results. We believe that
Capella's relationship and brand-driven marketing strategy and
initiatives to improve learner success rates have begun to bear
fruitful results. Margins also exceeded management expectations
in the quarter driven by top line growth and cost savings.
Further, continuous innovation and efforts to update courses are
Following the solid second-quarter results 2013, the Zacks
Consensus Estimate mostly moved upwards. The Zacks Consensus
Estimate for 2013 increased 5.9% and that for 2014 went up 4.0%
over the last 60 days.
Other Stocks to Consider
Capella has a Zacks Rank #1 (Strong Buy). Other education
companies that are performing well include
Grand Canyon Education, Inc.
TAL Education Group
). All the three companies carry a Zacks Rank #2 (Buy).