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Strayer Education Q1 Earnings Surpass Ests, Revs Lag

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Strayer Education Inc.’s (STRA - Free Report) first-quarter 2014 adjusted earnings of $1.40 per share surpassed the Zacks Consensus Estimate of $1.29 by 8.5%. We believe that the earnings beat was due to lower outstanding share count resulting from significant share repurchases in the prior quarters.

However, earnings declined 12.0% from the year-ago level of $1.59 due to a year-over-year decline in revenue, higher bad debt expenses and one less selling day in the quarter.

Total revenue in the quarter fell 15% from the comparable prior-year quarter to $116.5 million due to a year-over-year decline in enrollment, low revenue per student and one less selling day in the quarter. Total revenue lagged the Zacks Consensus Estimate of $118 million by 1.3%.

Revenue per student decreased 1.2% during the quarter. However, the company expects revenue per student to decline 4% to 5% in 2014 due to new cuts in undergraduate tuition fee.

Enrollment Discussion

Strayer University’s total enrollment declined 10% to 41,327 students for the spring term due to a decline in continuing student enrollments.

Continuing student enrollments went down 13% while new enrollments rose 1%.  New enrollment of both undergraduate and graduate students rose about 1%.

Strayer has been witnessing weak enrollment trends due to continued unemployment, overall economic downturn and a subsequent decline in student demand. Total enrollments are expected to decline in double digits in 2014. However, the recent improvement in new undergraduate student enrollment and graduate enrollments is encouraging.

Operating margin rose 40 basis points to 22.2% due to a year-over-year decline in revenue. Bad debt expense as a percentage of revenues was 4.3% in the first quarter, higher than 4.0% in the year-ago quarter.

Other Financial Details

Strayer Education ended the quarter with cash and cash equivalents of $126.2 million as of Mar 31, 2014 compared with $47.5 million as of Dec 31, 2013.

In the first quarter of 2014, the company did not repurchase any shares. As of Mar 31, 2014, the company had $70 million worth of shares left under its share repurchase authorization, which can now be bought back until Dec 31, 2014.  In the past few quarters, however, the company made significant share repurchases, resulting in a 2% decline in shares outstanding in the quarter.

Strayer Education carries a Zacks Rank #3 (Hold).  

Other Stocks to Consider

Other stocks worth considering in the education sector include DeVry Education Group Inc. , Grand Canyon Education, Inc. (LOPE - Free Report) and TAL Education Group . All the companies carry a Zacks Rank #2.

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