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Capella Education Company reported adjusted earnings of 81 cents in the third quarter of 2016, which surpassed the Zacks Consensus Estimate of 62 cents by 30.6%.
Adjusted earnings per share increased 20.9% year over year. Shares of Capella climbed 12.11% to $67.78 on Oct 25.
Revenues and Enrollment
Capella’s quarterly revenues of $105.9 million missed the Zacks Consensus Estimate of $106 million by 0.1%. Revenues inched up 5.8% from the year-ago level, owing to an improvement in enrollment levels.
Capella reports under two segments: Post-Secondary and Job-Ready Skills. While the Post-Secondary segment comprises Capella University and Sophia Learning, the Job-Ready Skills segment consists of Capella Learning Solutions, Hackbright Academy and DevMountain.
Post-Secondary: The segment reported revenues of $103.5 million, up 3.4% year over year, driven by positive enrollment levels at Capella University. Operating margin of 16.4% increased 160 basis points (bps) year over year, driven by revenue growth, effective cost management and lower bad debt expenses.
Capella University’s total active enrollment increased 2.8% to 37,708 learners, supported by significantly improved persistence, offset by slightly lower-than-expected enrollment growth. New enrollment decreased by 0.9% year over year primarily due to persistent volatility.
Early cohort persistence improved by approximately 4%. This marks the 19 consecutive quarter of improvement in early cohort persistence, implying that overall betterment in persistence is offsetting some of the volatility in new enrollment and is also driving total enrollments and operating performance.
Job-Ready Skills: The segment reported revenues of $2.4 million in the third quarter of 2016, compared with $0.03 million in the prior-year quarter. The segment reported an operating loss of $1.6 million compared with a loss of $0.7 million in the prior-year quarter.
Capella’s operating income from continuing operations was $15.3 million, compared with $14.1 million a year ago. Operating margin increased 40 bps to 14.5%.
Financials
Capella generated $34 million in operating cash flow from continuing operations during the quarter, ending the quarter with cash, cash equivalents, and marketable securities of $140.5 million, up from $113.6 million at 2015-end on the back of strong cash generation.
During the quarter, Capella paid cash dividend of 39 cents per share or $4.6 million, and purchased 130,000 of common stock. The remaining share repurchase authorization, at the end of the third quarter, was $33.5 million. Capital expenditures in the quarter were $4.7 million.
Fourth-Quarter 2016 Guidance
Consolidated revenues are expected to be up 3.5% to 4.5% from fourth-quarter 2015 levels. The company expects new enrollment to be slightly down year over year. Total enrollment is expected to increase about 2% to 3% year over year on the back of strong persistence.
Consolidated operating margin for continuing operations is projected at about 16% to 17% of total revenue for the quarter.
Fiscal 2016 Outlook
Capella provided guidance for fiscal 2016. Consolidated revenues are expected to be at the high end of the $424–$428 million range.
Earnings per share are estimated in the range of $3.50 to $3.55. This guidance is above the previous range of $3.30 to $3.40.
The company will continue to invest in 2017 to cash in on opportunities in the job-ready skills market.
DeVry Education Group Inc. (DV - Free Report) is slated to release third-quarter results on Nov 1. The Zacks Consensus Estimate for earnings is pegged at 62 cents.
American Public Education, Inc. (APEI - Free Report) is scheduled to report third-quarter results on Nov 7. The Zacks Consensus Estimate for earnings is pegged at 31 cents.
Universal Technical Institute, Inc. (UTI - Free Report) is expected to release third-quarter numbers on Dec 6. The Zacks Consensus Estimate for the bottom line is pegged at a loss of 29 cents.
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Capella Education (CPLA) Tops Q3 Earnings, Lags Revenues
Capella Education Company reported adjusted earnings of 81 cents in the third quarter of 2016, which surpassed the Zacks Consensus Estimate of 62 cents by 30.6%.
Adjusted earnings per share increased 20.9% year over year. Shares of Capella climbed 12.11% to $67.78 on Oct 25.
Revenues and Enrollment
Capella’s quarterly revenues of $105.9 million missed the Zacks Consensus Estimate of $106 million by 0.1%. Revenues inched up 5.8% from the year-ago level, owing to an improvement in enrollment levels.
Capella reports under two segments: Post-Secondary and Job-Ready Skills. While the Post-Secondary segment comprises Capella University and Sophia Learning, the Job-Ready Skills segment consists of Capella Learning Solutions, Hackbright Academy and DevMountain.
Post-Secondary: The segment reported revenues of $103.5 million, up 3.4% year over year, driven by positive enrollment levels at Capella University. Operating margin of 16.4% increased 160 basis points (bps) year over year, driven by revenue growth, effective cost management and lower bad debt expenses.
Capella University’s total active enrollment increased 2.8% to 37,708 learners, supported by significantly improved persistence, offset by slightly lower-than-expected enrollment growth. New enrollment decreased by 0.9% year over year primarily due to persistent volatility.
Early cohort persistence improved by approximately 4%. This marks the 19 consecutive quarter of improvement in early cohort persistence, implying that overall betterment in persistence is offsetting some of the volatility in new enrollment and is also driving total enrollments and operating performance.
Job-Ready Skills: The segment reported revenues of $2.4 million in the third quarter of 2016, compared with $0.03 million in the prior-year quarter. The segment reported an operating loss of $1.6 million compared with a loss of $0.7 million in the prior-year quarter.
CAPELLA EDUCATN Price, Consensus and EPS Surprise
CAPELLA EDUCATN Price, Consensus and EPS Surprise | CAPELLA EDUCATN Quote
Margins
Capella’s operating income from continuing operations was $15.3 million, compared with $14.1 million a year ago. Operating margin increased 40 bps to 14.5%.
Financials
Capella generated $34 million in operating cash flow from continuing operations during the quarter, ending the quarter with cash, cash equivalents, and marketable securities of $140.5 million, up from $113.6 million at 2015-end on the back of strong cash generation.
During the quarter, Capella paid cash dividend of 39 cents per share or $4.6 million, and purchased 130,000 of common stock. The remaining share repurchase authorization, at the end of the third quarter, was $33.5 million. Capital expenditures in the quarter were $4.7 million.
Fourth-Quarter 2016 Guidance
Consolidated revenues are expected to be up 3.5% to 4.5% from fourth-quarter 2015 levels. The company expects new enrollment to be slightly down year over year. Total enrollment is expected to increase about 2% to 3% year over year on the back of strong persistence.
Consolidated operating margin for continuing operations is projected at about 16% to 17% of total revenue for the quarter.
Fiscal 2016 Outlook
Capella provided guidance for fiscal 2016. Consolidated revenues are expected to be at the high end of the $424–$428 million range.
Earnings per share are estimated in the range of $3.50 to $3.55. This guidance is above the previous range of $3.30 to $3.40.
The company will continue to invest in 2017 to cash in on opportunities in the job-ready skills market.
CPLA currently carries a Zacks Rank #1(Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here
Upcoming Peer Releases
DeVry Education Group Inc. (DV - Free Report) is slated to release third-quarter results on Nov 1. The Zacks Consensus Estimate for earnings is pegged at 62 cents.
American Public Education, Inc. (APEI - Free Report) is scheduled to report third-quarter results on Nov 7. The Zacks Consensus Estimate for earnings is pegged at 31 cents.
Universal Technical Institute, Inc. (UTI - Free Report) is expected to release third-quarter numbers on Dec 6. The Zacks Consensus Estimate for the bottom line is pegged at a loss of 29 cents.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>