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Strayer Education (STRA) Q1 Earnings Beat, Enrollments Up

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Strayer Education Inc. (STRA - Free Report) reported first-quarter 2018 adjusted earnings of $1.23 per share, beating the Zacks Consensus Estimate of $1.11 by 10.8%. However, earnings improved 29.5% year over year.
    
Revenues improved 1.4% from the prior-year quarter to $116.5 million, owing to higher winter term enrollment. The upside was partly offset by lower revenue per student, given the continuing effect of scholarships issued in the fall 2017 term.

Enrollment Details

Total enrollment at Strayer University increased 6% to 46,184 students. New student enrollments rose 6% and continuing student enrollments increased 7%.

Strayer Education, Inc. Price, Consensus and EPS Surprise

 

Strayer Education, Inc. Price, Consensus and EPS Surprise | Strayer Education, Inc. Quote

Financial Details

Strayer Education ended the year with cash and cash equivalents of $165.9 million, compared with $155.9 million at 2017-end.

The company generated $17 million in cash from operating activities in the quarter, compared with $24.5 million in the year-ago period. Capital expenditures totaled $4.2 million compared with $3.8 million in the first quarter of 2017.

The company had $70 million worth of share repurchase authorization as of Mar 31, 2018. Notably, no shares were repurchased in the first quarter.

Guidance

Total enrollments at Strayer University are expected to grow 8% to approximately 46,800 students from the prior-year quarter.

New student enrollments are anticipated to increase roughly 7%. Continuing student enrollments are likely to increase approximately 8%.

Revenue per student in the quarter is likely to decline 5%.

Tax rate for the quarter is expected in the range of 27-28%.

Strayer-Capella Merger

In October 2017, Strayer Education and Capella Education Company announced an all-stock merger deal of equal transactions. The merger is expected to achieve annual cost savings of approximately $50 million to be fully phased in within 18 months of closing.

Notably, the transaction is expected to close in the third quarter of 2018. Post completion, Strayer Education’s stockholders will own approximately 52% of the combined entity and Capella’s shareholders will possess the remaining 48%.  The newly-formed entity will be renamed as Strategic Education Inc. and its ticker symbol will remain STRA.

The combined company is aimed to become a national leader in education innovation. The companies are likely to accelerate innovation in key products and services, as well as return capital to its shareholders through an expected annual dividend of $2 per share, following the closure of the transaction.

The merger is expected to ensure students’ success and positive employment outcomes. A shared effort by the companies is expected to improve academic outcomes by combining each of the university’s competencies. The merger will also facilitate a diversified product offering that will result in a balanced revenue mix.

Zacks Rank

Currently, Strayer Education carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Peer Releases

American Public Education, Inc. (APEI - Free Report) is slated to report quarterly numbers on May 8, after the closing bell.

Adtalem Global Education Inc. (ATGE - Free Report) is scheduled to report third-quarter fiscal 2018 results on May 3, after the closing bell.

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