We have maintained a Neutral recommendation on
Strayer Education Inc.
) following appraisal of first quarter 2012 results.
Strayer Education's first quarter 2012 earnings of $2.09 per
share were in line with the Zacks Consensus Estimate, but plunged
25% from $2.80 in the year-ago quarter due to revenue declines.
Revenues dropped 13% to $149.5 million due to lower enrollments in
Total enrollment at Strayer University for the 2012 spring term
declined 9% to 50,896 students. While continuing student
enrollments declined 13%, new enrollments were up 12%. The new
enrollment growth is encouraging, especially in the context of
declines suffered by most of its peer companies.
Strayer Education provides post-secondary education through its
wholly- owned subsidiary, Strayer University. It is focused
primarily on working adults in traditional classroom courses as
well as online. The company offers convenient weekend and evening
courses, which are well suited for the work-day schedules of
Currently, these mid-career professionals are apprehensive of
going back to school due to the difficult overall market
environment. But once the stringent regulatory environment and
overall economic conditions stabilize, working adults will seek
additional education to secure better jobs or to advance their
We are encouraged by Strayer's strong brand position and its
geographic expansion strategy of opening new campuses every year,
both in new states and markets. Strayer has grown from eight
campuses in one state in 1996 to 92 campuses in 23 states in the
U.S. In fiscal 2012, the company plans to open 8 new campuses. The
company's enrollment in new campuses jumped 25% in the first
quarter of 2012. We believe that the company's geographic expansion
strategy will drive further enrollment growth, going forward.
The company's convenient evening, weekend and online courses
attract corporate alliances and community college articulation
agreements. Currently, the company has employer arrangements with
both private and government organizations like
), Department of Health and Human Services, Federal Bureau of
) and many more. Strayer's corporate alliances give it a
competitive advantage and contribute significantly to growth.
The community college articulation agreements allow for credits
and degrees earned at partner institutions to be transferable to a
related Strayer University degree. These agreements usually bring
students who finish with strong outcomes.
On the flip side, new enrollment growth notwithstanding, the
company continues to suffer from a difficult regulatory environment
as well as weak student demand. The company has been witnessing a
decline in enrollments over the last 18 months due to continued
unemployment, the overall economic downturn and a related decline
in student demand due to lower confidence in job prospects. We thus
prefer to remain on the sidelines until we see substantial
enrollment growth and improvement in the overall industry
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