On Apr 10, 2014, we issued an updated research report on
American Public Education, Inc.
On Feb 27, this online higher education provider reported
disappointing fourth-quarter 2013 results and provided a bleak
outlook for the upcoming quarter. Apart from missing the Zacks
Consensus Estimate by 5.6%, fourth-quarter 2013 earnings declined
31.1% year over year due to military enrollment hurdles and
Total revenue declined 4% year on year, slightly better than
management's expectation of a decline of 5-9%. Revenues also beat
the Zacks Consensus Estimate by 2.3%. We believe that the
top-line beat was only due to the inclusion of $3.8 million of
revenues from Hondros. APUS revenues were lower than expected due
to weaker enrollment trends.
The poor quarterly results were mostly due to a
worse-than-expected decline in total and new student enrollment
levels. Enrollments in the fourth quarter were adversely
impacted by a decline in enrollments of students using Department
of Defense (DoD) Tuition Assistance or TA benefits. The temporary
suspension of the TA due to the government shutdown in Oct 2013
and lowering of the benefits by the military greatly hurt
enrollments of military students. The company also witnessed weak
margins due to increase in expenses.
Estimates for 2014 and 2015 were largely revised downwards in
response to the soft fourth-quarter results and bleak outlook for
the upcoming quarter. Management expects continued military
enrollment hurdles in the first quarter of 2014. New
enrollments of students using TA benefits are expected to decline
again in the first quarter due to ongoing budgetary constraints
Management expects first-quarter 2014 total enrollments to
decline in the range of 5% to 7% while student starts are
expected to go down in the range of 7% to 9%. American Public
expects revenues to remain in the range of flat to an increase of
3%. Management projects first-quarter 2014 earnings between 43
cents and 48 cents, which marks a significant decline from the
Key Picks from the Sector
American Public Education carries a Zacks Rank #4 (Sell). Some
better-ranked stocks in the education sector include
Strayer Education Inc.
Apollo Education Group, Inc.
). While Strayer Education and K12 sport a Zacks Rank #1 (Strong
Buy), Apollo Education carries a Zacks Rank #2 (Buy).
AMER PUB EDUCAT (APEI): Free Stock Analysis
APOLLO GROUP (APOL): Free Stock Analysis
K12 INC (LRN): Free Stock Analysis Report
STRAYER EDUC (STRA): Free Stock Analysis
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