Earnings Preview: Strayer Education - Analyst Blog


Strayer Education Inc. ( STRA ), a for-profit education company, is slated to report its fourth-quarter 2011 financial results on February 16, 2012. The current Zacks Consensus Estimate for the quarter is $2.26 per share, representing an estimated year-over-year decrease of about 17%. Revenue, as per the Zacks Consensus Estimate, is $155 million.

Third-Quarter Synopsis

Strayer Education's third-quarter earnings of $1.20 per share surpassed the Zacks Consensus Estimate of $1.06, but plunged 30% from $1.72 in the year-ago quarter.

Total revenue for the quarter dropped 8% from the prior-year quarter to $135.9 million. The decrease was attributable to a fall in enrollment, partially offset by an increase in tuition fees. Total revenue also fell short of the Zacks Consensus Estimate of $138.0 million.

Agreement of Estimate Revisions

Of the 13 analysts covering the stock, none revised their estimates in either direction in the last 30 days.

Magnitude of Estimate Revisions

The Zacks Consensus estimate remained stable in the last 30 days as the risk-reward ratio remains well balanced for the stock.

The significant risk looming over the education sector is the fall in student enrollment. Strayer Education registered a drop of 10% in total campus-based students in the third quarter. Moreover, the company registered a fall of 15% in global online students. Further, the company also announced that new student enrollment also dropped 15%.

To encounter lower enrollment and boost profits, Strayer Education implemented a 3% hike in tuition fees effective January 2012. The initiative is expected to provide an upside to the company's top-line results.

Positive Earnings Surprise History

With respect to earnings surprises, Strayer Education has topped the Zacks Consensus Estimate over the last four quarters in the range of 3.4% to 13.2%. The average remained at 6.8%, indicating that the company has surpassed the Zacks Consensus Estimate by the same magnitude in the trailing four quarters.

Our Take

Strayer Education's rich legacy and its strong focus toward working adults enabled it to establish a healthy position in the for-profit post-secondary education industry. Moreover, the company's sustained effort to expand educational programs will boost the enrollment numbers.

Further, the current economic condition is somewhat in favor of the education companies as postsecondary enrollments tend to rise as both unemployed and employed workers return to school to re-skill themselves.

However, we remain concerned about the continued decline in the enrollments, which is likely to hamper the results of the education companies. Moreover, another for-profit education company, Capella Education Company ( CPLA ), expects new student enrollment to decline in the coming quarters.

Currently, Strayer Education holds a Zacks #4 Rank, which translates into a short-term Sell recommendation. However, considering the fundamentals, we have a long-term Neutral rating on the stock.

CAPELLA EDUCATN ( CPLA ): Free Stock Analysis Report
STRAYER EDUC ( STRA ): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CPLA , STRA



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