Strayer Education Inc.
) recently posted third quarter 2012 earnings of 36 cents per
share, beating the Zacks Consensus Estimate of 32 cents. Earnings
were also better than the company's expected range of 30 cents -
32 cents. However, earnings plunged significantly from $1.20
reported in the year-ago period due to top-line decline.
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Total revenue in the quarter dropped 9% from the prior-year
quarter to $124.3 million due to weak enrollments. Total revenue,
however, beat the Zacks Consensus Estimate of $123 million.
Quarter in Detail
Strayer University's total enrollment for the 2012 fall term
declined 5% to 51,727 students. New student enrollments were up
4% year over year. However, continuing student enrollment dropped
7% due to the declining continuation rate in the quarter.
Total number of campus-based students declined 6% to 45,977
whereas global online student enrollment went up 13% year over
year to 5,750. Students taking full-time online classes went down
4% during the quarter.
The company's convenient evening, weekend and online courses
attract corporate alliances and community college articulation
agreements. Investment in new campuses is an important part of
the company's growth strategy. The company regularly opens new
campuses every year, both in new states and markets.
Enrollment at mature campuses (71 in operations for more than 3
years) tumbled 10% to 41,527 whereas enrollment at new campuses
(26 in operations for 3 years or less) grew 40% to 4,450. The
company opened one new campus in San Antonio, Texas during the
fall term of 2012. The company intends to open three more new
campuses in rest of fiscal 2012 as a part of its plan to open
eight new campuses during the year.
Operating income in the quarter plummeted 68% to $7.8 million.
Operating margin contracted 1170 basis points to 6.3%. Bad debt
expense as a percentage of revenues was 4.2% in the third
quarter, up 40 basis points from the prior-year quarter.
Other Financial Details
Strayer Education ended the quarter with cash and cash
equivalents of $45.6 million as of September, 2012, down from
$48.7 million in June, 2012.
Guidance for 2012
A peer of
), Strayer Education expects fourth quarter 2012 earnings to lie
in the range of $1.43 - $1.45 per share. Full year 2012 earnings
are expected to be in the range of $5.73 to $5.75. The Zacks
Consensus Estimate is pegged at $1.59 for the fourth quarter and
$5.85 per share for the fiscal.
For 2013, the company expects earnings to be in the range of
$5.40-$5.60 per share. There will be a 3% hike in tuition fee
from January 2013 onward. However, the company expects revenue
per student to remain flat in 2013, owing to a mix shift toward
graduate and corporate sponsored students. The company also
expects expenses to grow 1% - 2% in 2013, owing to the costs
associated with eight new campuses in 2012.
The company announced that no regular quarterly dividend will be
paid in the fiscal 2013.
We are encouraged by Strayer's strong brand position and its
strategy of opening new campuses every year, both in new states
and markets. Further, the company's corporate alliances give it a
competitive advantage and contribute significantly to growth. On
the flip side, the company continues to suffer from a difficult
regulatory environment as well as weak student demand. We prefer
to stay on the sideline given, its declining enrollment and weak
guidance of 2013.
Currently, Strayer Education carries a Zacks # 4 Rank in the near
term (Sell rating). We have a Neutral recommendation on the