Shares of Strayer Education, Inc.STRA declined over 8% on Oct 28 after the education company reported weak revenues and margins in third-quarter 2015.
Strayer Education's third-quarter 2015 adjusted earnings of 32 cents per share surpassed Zacks Consensus Estimate of 30 cents by 6.7%. However, adjusted earnings decreased 13.5% year over year due to lower revenues and margins.
Strayer Education Inc. (STRA) - Earnings Surprise | FindTheCompany
Total revenue of $99.1 million barely surpassed the Zacks Consensus Estimate of $99 million. In spite of an increase in total enrollment, revenues fell 1.7% from the comparable prior-year quarter due to lower revenue per student in the quarter.
Revenue per student decreased 3.8% during the quarter, owing to a shift in mix to lower tuition undergrads. This was almost in line with the company's guidance of a 4% decline.
Enrollment Discussion
Strayer University's total enrollment rose 2% to 42,975 students for the fall term, driven by a 3% increase in continuing student enrollments, partially offset by a 1% decrease in new enrollment.
Adjusted operating margin decreased 70 basis points to 6.9% due to soft revenues. Bad debt expense as a percentage of revenues was 2.3% in the third quarter, reflecting an improvement of 130 bps from the year-ago quarter and 90 bps from the prior quarter.
Other Financial Details
Strayer Education ended the quarter with cash and cash equivalents of $86.9 million, as of Sep 30, 2015, lower than $195.6 million, as of Jun 30, 2015. No shares were repurchased during the quarter. The company has $70 million of share repurchase authorization remaining as of Sep 30, 2015.
Outlook
Revenue per student is expected to decline about 4% in the fourth quarter of 2015. Revenue per student is expected to be around the lower end of the range of 3% - 4% in fiscal 2015. Strayer expects its operating expenses to be flat in 2015.
If total enrollment continues to improve, the company expects revenues to increase year over year in 2016.
Strayer Education carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the education industry include New Oriental Education & Technology Group Inc. EDU , Bridgepoint Education, Inc. BPI and TAL Education Group XRS . While New Oriental Education & Technology Group and TAL Education Group sport a Zacks Rank #1 (Strong Buy), Bridgepoint Education holds a Zacks Rank #2 (Buy).
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
