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Updated Research Report on Capella Education - Analyst Blog

On Jun 06, 2014, we issued an updated research report on Capella Education Company ( CPLA ).

On Apr 29, this online post-secondary education services provider posted mixed first-quarter 2014 results. Earnings of 70 cents per share missed the Zacks Consensus Estimate but remained flat year over year owing to softer margins.

Revenues beat the Zacks Consensus Estimate marginally and inched up only 0.3% from the year-ago level. While tuition fee increased 2.8% and student start improved in the quarter, the company continued to see decline in enrollments.

The company has been witnessing fluctuating enrollment trends in the last few quarters, which in turn dampened total enrollments, revenues, cash flow and profitability. Enrollment growth was affected by tough global market conditions and a subsequent decline in student demand (due to hesitancy over taking a loan).

However, the company witnessed 2.6% increase in student starts in the reported quarter on the back of an increase in new enrollments in Master's programs during the quarter. In fact, the company expects the positive trend to continue in the second quarter of 2014.

Headquartered in Minneapolis, MN, Capella Education expects new enrollments for second quarter 2014 to increase in mid-single digit year over year on the back of an expected improvement in enrollments in bachelor degree programs. However, total enrollment is expected to dip 1.0% to 2.0% in the quarter, as the improvement in new enrollment needs to be more consistent in the upcoming quarters to generate positive total enrollment.

Revenues are expected to remain flat to up 1.0% year over year in the second quarter of 2014 on the back of a contribution from businesses outside Capella University and higher revenue per student at Capella University. In addition to Capella University, Capella Education generates revenue from other wholly-owned subsidiaries such as Resource Development International Ltd. (RDI) and Sophia Learning LLC. The company intends to increase average tuition fee by 2.5% from Jul 2014. Operating margin is expected in the range of 16.5% to 17.5% for the second quarter, compared to 14.3% in the first quarter 2014.

Capella Education expects positive total enrollment growth and operating margin improvement in full year 2014.

Capella Education carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Some better-ranked stocks in the education sector include Lincoln Educational Services Corporation ( LINC ), Strayer Education Inc. ( STRA ) and DeVry Education Group Inc. ( DV ). While Lincoln Educational Services sports a Zacks Rank #1 (Strong Buy), Strayer Education and DeVry Education carry a Zacks Rank #2 (Buy).

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DEVRY EDUCATION (DV): Free Stock Analysis Report

CAPELLA EDUCATN (CPLA): Free Stock Analysis Report

LINCOLN EDUCATL (LINC): 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.


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

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