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American Public Education (APEI) Q1 Earnings Top Estimates

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American Public Education, Inc. (APEI - Free Report) reported mixed first-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate, while revenues missed the same. Also, the company’s top line declined year over year, while the bottom line increased during the reported quarter.

American Public Education’s adjusted earnings of 32 cents per share topped the consensus estimate of 31 cents by 3.2%. The reported figure increased 14.3% on a year-over-year basis.

Revenues & Segment Discussion

American Public Education, Inc. Price, Consensus and EPS Surprise

Total revenues during the quarter decreased 2% to $73.4 million from the year-ago figure of $75 million. The reported figure lagged the consensus mark of $74 million by 0.1%. Lower contribution from the Hondros College of Nursing (“HCN”) and softness in American Public University System (“APUS”) impacted overall results.

Total revenues from the APEI segment amounted to $65.7 million, up 0.1% from the year-ago quarter. The upside was driven by 26% growth in net course registrations by new students utilizing DoD Tuition Assistance (TA), partially offset by those utilizing Federal Student Aid (FSA). Total net course registration grew 1% from the year-ago quarter to 84,300. Net course registrations by new students also climbed 8% during the quarter to 10,120. However, as of Mar 31, 2019, APUS student enrollment declined 2% to 81,200 from the comparable year-ago period.

HCN’s revenues decreased 16.7% from a year ago to $7.7 million in the reported quarter owing to reduced enrollments. Total enrollment in HCN also decreased 15% to 1,700 students from the prior-year figure of 2,000, while new student enrollment fell nearly 32% to 340. The decline was mainly due to the implementation of multiple changes in its missions and academic achievement requirements.

Since Jan 1, 2019, the APEI segment started charging HCN for the value of courses taken by employees at APUS. During the reported quarter, inter-segment elimination totaled $27 million.

Operating Highlights

Total costs and expenses during the quarter grew 4.7% year over year. The rise in cost and expenses was primarily due to increased advertising costs and professional fees in its APEI segment.

Instructional costs & services expenses, as a percentage of revenues, decreased 160 basis points (bps) to 38%. Selling & promotional expenses, as a percentage of revenues, increased 30 bps. However, general and administrative expenses, as a percentage of revenues, grew 80 bps, mainly due to higher compensation costs across its segments.

Financials

As of Mar 31, 2019, total cash and cash equivalents were approximately $215.9 million compared with $212.1 million at the end of 2018. Capital expenditures totaled $1.6 million in the first quarter compared with $1.7 million a year ago.

During the reported quarter, the company authorized a new share repurchase program of $35 million.

Second-Quarter 2019 Guidance

For second-quarter 2019, the company expects total revenues to decline within 2-6% from a year ago. Earnings are anticipated in the range of 25-30 cents per share, below the Zacks Consensus Estimate of 39 cents.

Net course registrations at APUS are expected to be between a decline of 3% and growth of 2% year over year. Registrations by new students are anticipated to lie within a decline of 4% and growth of 1%.

At HCN, total student enrollment is likely to decline 24% from the year-ago quarter. New student enrollment is also estimated to fall about 35% from the prior-year quarter.

Zacks Rank & Key Picks

Currently, American Public Education carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Schools industry are Strategic Education, Inc. (STRA - Free Report) , Bright Horizons Family Solutions Inc. (BFAM - Free Report) and Career Education Corporation (CECO - Free Report) . While Career Education sports a Zacks Rank #1 (Strong Buy), both Adtalem and K12 carry a Zacks Rank #2 (Buy). You can the complete list of today’s Zacks #1 Rank stocks here.

Strategic Education is expected to record an EPS growth rate of 36.2% in the current year.

Bright Horizons has an expected earnings growth rate of 12.8% for 2019.

Career Education’s earnings per share are expected to increase 9.5% in fiscal 2018.

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