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Capella Education Company reported adjusted earnings of 97 cents in the fourth quarter of 2016, which surpassed the Zacks Consensus Estimate of 95 cents by 2.1%. Adjusted earnings per share decreased 7.6% year over year.
Revenues and Enrollment
Capella’s quarterly revenues of $111.3 million beat the Zacks Consensus Estimate of $110.50 million by 0.7%. Revenues inched up 4.9% from the year-ago level, owing to an improvement in enrollment levels. Revenues were at the high end of the projected range of 3.5% to 4.5%.
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 $109.4 million, up 3.1% year over year, driven by positive enrollment levels at Capella University. Operating margin of 18.9% decreased 210 basis points (bps) year over year.
Capella University’s total active enrollment increased 2.5% to 37,882 learners, supported by significantly improved persistence, offset by a slight decrease in enrollment growth. New enrollment decreased by 1.1% year over year primarily due to persistent volatility.
Early cohort persistence improved by approximately 5%. This marks the 20 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 $1.9 million in the quarter, compared with $0.02 million in the prior-year quarter. The segment reported an operating loss of $2.4 million compared with a loss of $1.8 million in the prior-year quarter.
Margins
Capella’s operating income from continuing operations was $18.3 million, compared with $20.5 million a year ago. Operating margin decreased 290 bps to 16.4%. The company increased its marketing spend in the fourth quarter 2016, in order to boost new enrollment growth for Capella University in the upcoming quarters.
Financials
Capella generated $85.1 million in operating cash flow from continuing operations, ending the quarter with cash, cash equivalents and marketable securities of $162.3 million, up by $3 million from 2015-end on the back of strong cash generation.
During the quarter, the company announced a 5% increase in its quarterly cash dividend to $0.41 per outstanding share of common stock, payable on Jan 13, 2017.
The company repurchased approximately 488,000 shares of Capella stock for a total consideration of $25.6 million in fiscal 2016 and approximately 51,000 shares of Capella stock for total consideration of $3.1 million in the fourth quarter of 2016. The remaining authorization, as of the end of the fourth quarter, was $30.4 million.
Capital expenditures in the quarter were $6.2 million.
2016 Results
Capella reported adjusted earnings of $3.62 in 2016, up 10.7% year over year. Earnings were above the estimated range of $3.50 to $3.55.
Capella’s quarterly revenues of $429.4 million inched up 3.1% from the year-ago level, owing to a strong performance by the Post-Secondary segment. Revenues were slightly higher than the expected range of $424–$428 million.
Capella Education Company Price, Consensus and EPS Surprise
Consolidated revenues are expected to be up 5% to 6% from first-quarter 2016 levels. Capella University new enrollment is expected to be up in the low-single digit range and total enrollment is likely to increase by 1% year over year.
Consolidated operating margin for continuing operations is projected at about 14.5% to 15.5% of total revenue for the quarter.
2017 Guidance
Consolidated revenues are expected to be to be up 3% to 5%.
Operating margins are expected to be similar to fiscal 2016 levels.
Grand Canyon Education, Inc. (LOPE - Free Report) and Strayer Education Inc. (STRA - Free Report) are scheduled to release their quarterly numbers on Feb 16.
The Zacks Consensus Estimate for earnings is pegged at 98 cents for Grand Canyon and $1.16 for Strayer Education.
American Public Education, Inc. (APEI - Free Report) is scheduled to report fourth-quarter results on Feb 28. The Zacks Consensus Estimate for earnings is pegged at 44 cents.
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Capella Education (CPLA) Tops Q4 Earnings, Revenue Estimates
Capella Education Company reported adjusted earnings of 97 cents in the fourth quarter of 2016, which surpassed the Zacks Consensus Estimate of 95 cents by 2.1%. Adjusted earnings per share decreased 7.6% year over year.
Revenues and Enrollment
Capella’s quarterly revenues of $111.3 million beat the Zacks Consensus Estimate of $110.50 million by 0.7%. Revenues inched up 4.9% from the year-ago level, owing to an improvement in enrollment levels. Revenues were at the high end of the projected range of 3.5% to 4.5%.
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 $109.4 million, up 3.1% year over year, driven by positive enrollment levels at Capella University. Operating margin of 18.9% decreased 210 basis points (bps) year over year.
Capella University’s total active enrollment increased 2.5% to 37,882 learners, supported by significantly improved persistence, offset by a slight decrease in enrollment growth. New enrollment decreased by 1.1% year over year primarily due to persistent volatility.
Early cohort persistence improved by approximately 5%. This marks the 20 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 $1.9 million in the quarter, compared with $0.02 million in the prior-year quarter. The segment reported an operating loss of $2.4 million compared with a loss of $1.8 million in the prior-year quarter.
Margins
Capella’s operating income from continuing operations was $18.3 million, compared with $20.5 million a year ago. Operating margin decreased 290 bps to 16.4%. The company increased its marketing spend in the fourth quarter 2016, in order to boost new enrollment growth for Capella University in the upcoming quarters.
Financials
Capella generated $85.1 million in operating cash flow from continuing operations, ending the quarter with cash, cash equivalents and marketable securities of $162.3 million, up by $3 million from 2015-end on the back of strong cash generation.
During the quarter, the company announced a 5% increase in its quarterly cash dividend to $0.41 per outstanding share of common stock, payable on Jan 13, 2017.
The company repurchased approximately 488,000 shares of Capella stock for a total consideration of $25.6 million in fiscal 2016 and approximately 51,000 shares of Capella stock for total consideration of $3.1 million in the fourth quarter of 2016. The remaining authorization, as of the end of the fourth quarter, was $30.4 million.
Capital expenditures in the quarter were $6.2 million.
2016 Results
Capella reported adjusted earnings of $3.62 in 2016, up 10.7% year over year. Earnings were above the estimated range of $3.50 to $3.55.
Capella’s quarterly revenues of $429.4 million inched up 3.1% from the year-ago level, owing to a strong performance by the Post-Secondary segment. Revenues were slightly higher than the expected range of $424–$428 million.
Capella Education Company Price, Consensus and EPS Surprise
Capella Education Company Price, Consensus and EPS Surprise | Capella Education Company Quote
First-Quarter 2017 Guidance
Consolidated revenues are expected to be up 5% to 6% from first-quarter 2016 levels. Capella University new enrollment is expected to be up in the low-single digit range and total enrollment is likely to increase by 1% year over year.
Consolidated operating margin for continuing operations is projected at about 14.5% to 15.5% of total revenue for the quarter.
2017 Guidance
Consolidated revenues are expected to be to be up 3% to 5%.
Operating margins are expected to be similar to fiscal 2016 levels.
Zacks Rank & Upcoming Peer Releases
Capella currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Grand Canyon Education, Inc. (LOPE - Free Report) and Strayer Education Inc. (STRA - Free Report) are scheduled to release their quarterly numbers on Feb 16.
The Zacks Consensus Estimate for earnings is pegged at 98 cents for Grand Canyon and $1.16 for Strayer Education.
American Public Education, Inc. (APEI - Free Report) is scheduled to report fourth-quarter results on Feb 28. The Zacks Consensus Estimate for earnings is pegged at 44 cents.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>