On Mar 16, 2016, we issued an updated research report on Strayer Education Inc.STRA .
On Feb 4, this education company reported fourth quarter and full year 2015 results.
Strayer Education's fourth-quarter 2015 adjusted earnings of $1.21 per share surpassed the Zacks Consensus Estimate of $1.17 by 3.4%. However, adjusted earnings remained flat year over year due to lower revenues. Total revenue of $113.7 million came almost in line with the Zacks Consensus Estimate but fell 2% year over year due to lower revenue per student in the quarter.
Total enrollment rose year over year in the fourth quarter, driven by an increase in continuing student enrollments owing to solid improvement in student retention and strong performance at Jack Welch Management Institute. Total enrollment has increased for the last three quarters of 2015, driven by regular increase in continuing student enrollments and solid improvement in student retention.
However, new enrollment declined 5% during the quarter owing to unfavorable mix. In-fact, Strayer Education reported volatile starts, soft revenues and weak margins through 2015. The situation is not likely to improve in 2016.
Moreover, tuition cuts and unfavorable mix of students toward lower undergraduate tuition resulted in softer revenue per student in the past few quarters. In addition, the company's revenue per student is expected to decline about 100 basis points in 2016.
However, Strayer has been taking several initiatives to drive new enrollments. Many students are unable to complete their graduation programs due to high fees or related costs. Therefore, in order to encourage students to complete the programs, in Jan 2014, the board of trustees approved an approximate 20% cut in Strayer's undergraduate tuition costs. The initiative improved college affordability and its value proposition.
Moreover, the recent acquisition of New York Code and Design Academy is encouraging given high demand for web and applications software development professionals and should drive enrollments in the near term.
Strayer carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the education industry include American Public Education, Inc. APEI , Grand Canyon Education, Inc. LOPE and Capella Education Co. CPLA . While American Public Education sports a Zacks Rank #1 (Strong Buy), Grand Canyon Education and Capella Education hold a Zacks Rank #2 (Buy).