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Will Strayer Education Continue to Grow Despite Headwinds?
On Jun 30, 2016, we issued an updated research report on Strayer Education Inc. (STRA - Free Report) .
On May 4, this post-secondary education company reported strong results in first-quarter 2016.
In addition to beating the Zacks Consensus Estimate, Strayer Education’s first-quarter 2016 adjusted earnings of $1.06 per share rose about 1% year over year, mostly driven by improved bad debt ratio and lower tax rate. However, revenues fell 1% as soft revenue per student offset the benefit of an increase in total enrollment. Though total enrollment rose year over year, new enrollment declined 7% owing to a decrease in enrollment of unaffiliated undergraduate student segment.
Strayer Education reported volatile starts, soft revenues and weak margins through 2015 and the first quarter of 2016. Despite affordability initiatives like lower tuition rates and introduction of graduation funds, the situation is not likely to improve in 2016. Tuition cuts and an unfavorable mix of students toward lower undergraduate tuition have been resulting in declining revenue per student in the past few quarters. This trend is expected through the rest of the quarters of 2016, which may hurt revenues.
However, total enrollment has increased year over year for the last four quarters, driven by a consistent increase in continuing student enrollment and solid improvement in student retention. Moreover, the recent acquisition of New York Code and Design Academy is strategically significant given the high demand for web and applications software development professionals and should support enrollments in the near term.
Strayer Education carries a Zacks Rank #4 (Sell).
Better-ranked stocks in the school space may also consider American Public Education, Inc. (APEI - Free Report) , Lincoln Educational Services Corporation (LINC - Free Report) , and ITT Educational Services Inc. (ESI - Free Report) . While American Public Education sports a Zacks Rank #1 (Strong Buy), Lincoln Educational Services and ITT Educational Services hold a Zacks Rank #2 (Buy).
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