Strayer Education Stays Neutral - Analyst Blog


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On Dec 17, we reiterated our Neutral recommendation on Strayer Education Inc. ( STRA ). The company beat earnings estimates in the third quarter of 2013.  However, we remain cautious until we see substantial enrollment growth and improvement in the overall industry.

Why a Neutral Recommendation?

On Oct 31, 2013, Strayer's third quarter earnings of 30 cents per share crushed the Zacks Consensus Estimate of 5 cents due to lower share count. Total revenue was in line with the Zacks Consensus Estimate of $110 million.

However, earnings declined 17% year over year due to weak top-line performance and sluggish margins. Total revenue in the quarter dropped 11% from the comparable prior-year quarter to $110 million due to continued weak enrollment trends. In addition, the company is undertaking a bold restructuring plan - including job cuts and site closures -- and an aggressive cut in tuition fees.

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 trends and the overall industry environment

Other Stocks to Consider

Strayer Education holds a Zacks Rank #3 (Hold). Better-ranked stocks in the education sector include ITT Educational Services Inc. ( ESI ), New Oriental Education & Technology Group Inc. ( EDU ) and Xueda Education Group ( XUE ). Both ITT Educational Services and New Oriental Education & Technology Group carry a Zacks Rank #1 (Strong Buy), whereas Xueda Education Group carries a Zacks Rank #2 (Buy).

NEW ORIENTAL ED (EDU): Free Stock Analysis Report

ITT EDUCATIONAL (ESI): Free Stock Analysis Report

STRAYER EDUC (STRA): Free Stock Analysis Report

XUEDA EDUC-ADR (XUE): Free Stock Analysis Report

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

This article appears in: Investing , Business , Stocks
More Headlines for: EDU , ESI , STRA , XUE

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