On Jun 13, 2016, we issued an updated research report on Capella Education CompanyCPLA .
On Apr 26, this Minneapolis-based education company reported solid results for the first quarter of 2016 and provided an optimistic outlook for the second quarter.
Capella's first quarter earnings of 86 cents per share surpassed the Zacks Consensus Estimate by 6.17%. However, earnings fell 2.3% year over year, owing to soft revenues. Revenues of $105.4 million missed the Zacks Consensus Estimate by 0.5% and inched down 0.2% year over year. The revenue decline was due to unfavorable degree mix shift and change in accounting for revenue recognition.
During the past several quarters, degree mix shifted toward the master's programs, as more learners got enrolled in master degree programs than doctoral learners. Since master's degree programs generate less revenue per student, overall revenues were hurt. All these headwinds were partially offset by an increase in total enrollment in 2015 and early 2016 and tuition hike of about 2% implemented in Jul 2015 for Capella University. Total enrollment growth was driven by higher enrollment in FlexPath programs.
Moreover, Capella acquired Hackbright Academy on Apr 22, a provider of non-degree software engineering. Capella expects the acquisition to contribute to revenue increase by a point in 2016. These new non-degree programs focus on bridging the skill gap in the market and should appeal to working adults as well as employers, thereby driving the company's top line in the near future.
Capella Education carries a Zacks Rank #2 (Buy).
Investors interested in the education business may also consider stocks like Lincoln Educational Services Corporation LINC , American Public Education APEI and ITT Educational Services Inc. ESI . While American Public Education sport a Zacks Rank #1 (Strong Buy), Lincoln Educational and ITT Educational Services hold a Zacks Rank #2.