On Aug 23, we reiterated our Neutral recommendation on
Strayer Education Inc.
). Despite better than expected results in the second quarter
2013, we remain on the sidelines until we see substantial
enrollment growth and improvement in the overall industry
Why a Neutral Recommendation?
On Jul 25, 2013, Strayer Education beat the Zacks Consensus
Estimate for earnings and revenues by 2.9% and 0.8%,
respectively. Earnings and revenue were also ahead of the
company guided range. We believe that the earnings and revenue
beat was driven by strong revenue per student. With improving
continuation rate at the graduate level, the company benefited
from the shift of mix toward graduate students, which comprised
36% of the total student population in the quarter.
However, earnings declined 23% year over year due to lower
revenues. Total revenue also went down year over year due to
Overall we are encouraged by Strayer's strong brand position.
Further, the company's corporate alliances give it a competitive
advantage and contribute significantly to growth. However,
Strayer has been witnessing a drop in enrollment due to continued
unemployment, overall economic downturn and subsequent decline in
student demand. We therefore prefer to remain on the sidelines
until we witness a significant improvement in enrollment and
improvement in the overall industry environment
Other Stocks to Consider
Strayer Education holds a Zacks Rank #3 (Hold). Other education
companies that are performing well include
Capella Education Company
Grand Canyon Education, Inc.
TAL Education Group
). Capella has a Zacks Rank #1 (Strong Buy), while Grand
Canyon and TAL Education both have a Zacks Rank #2 (Buy).
CAPELLA EDUCATN (CPLA): Free Stock Analysis
GRAND CANYON ED (LOPE): Free Stock Analysis
STRAYER EDUC (STRA): Free Stock Analysis
TAL EDUCATN-ADR (XRS): Free Stock Analysis
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