On Dec 17, we reiterated our Neutral recommendation on
Strayer Education Inc.
). 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
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
NEW ORIENTAL ED (EDU): Free Stock Analysis
ITT EDUCATIONAL (ESI): Free Stock Analysis
STRAYER EDUC (STRA): Free Stock Analysis
XUEDA EDUC-ADR (XUE): Free Stock Analysis
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Other Stocks to Consider
Strayer Education holds a Zacks Rank #3 (Hold). Better-ranked
stocks in the education sector include
ITT Educational Services Inc.
New Oriental Education & Technology Group
Xueda Education Group
). 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).