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American Public (APEI) Plunges 51% Post Q4 Results: Here's Why
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American Public Education, Inc. (APEI - Free Report) tumbled a whopping 50.76% on Mar 15 after it reported its fourth-quarter 2022 result. Investors’ sentiment was hurt by lackluster earnings and revenue performance.
During the period, the company reported a loss of 27 cents per share versus adjusted earnings of 50 cents reported a year ago. Low contributions and increased expenses from the RU segment and the inclusion of GSUSA’s costs and expenses negatively impacted the company’s performance during the quarter.
High Costs, Low Margins: American Public has been experiencing increased costs, which is ultimately denting profitability. Total costs and expenses increased by 11.1% year over year due to the above-mentioned headwinds. Adjusted EBITDA declined 47.4% year over year. Total costs and expenses for 2022 increased 91.5% year over year and adjusted EBITDA fell 12.3% from 2021.
This increase was also attributed to the increases in employee compensation costs at HCN and Corporate and Other segments, faculty compensation costs and advertising costs in the HCN segment and an increase in graduation event costs in the APUS unit. Also, a non-cash impairment charge, information technology costs related to the multi-year technology transformation program at APUS and professional fees associated with the RU and GSUSA acquisitions in Corporate and Other added to the woes.
Tepid RU Enrollment: In particular, RU segment’s revenue declined to $60.7 million from $68.4 million reported a year ago. Total student enrollment also fell 9% due to a 23% collective decline in both nursing and non-nursing enrollment. In 2022, RU enrollment decreased 7.4% year over year due to caps on nursing student enrollment at certain campuses, reduced demand for nursing education due to record low unemployment in some markets and fewer available nursing faculty to educate and oversee clinicals.
Lackluster Guidance: In first-quarter 2023, APEI expects total revenues to be flat to up 2% and be in the range of $155.1-$157.1 million. In the same quarter, it anticipates an adjusted loss in the range of 44-51 cents per share versus an earnings of 12 cents per share. Adjusted EBITDA is anticipated to be between $2.4 million and $4.1 million, suggesting a decline of 86-76% year over year.
RU’s student enrollment is likely to fall 12% to 14,300. Nursing student enrollment is likely to fall 19% to 6,800. Non-nursing student enrollment is expected to decline 4% year over year to 7,500.
Stringent Regulations: American Public derives a significant portion of its revenues from Title IV federal aid programs. These programs are subject to stringent regulations of the Department of Education and accrediting agencies recognized by the Secretary of Education. The Title IV programs, which account for a major portion of the company’s revenues, are administered by the Department of Education. The regulations and policies of the Department of Education, state education agencies and accrediting agencies change frequently. Moreover, budget constraints in states that provide financial aid to the students of American Public could reduce the amount of aid, which may affect enrollment growth.
Key Picks
Some better-ranked stocks in the Zacks Schools industry are:
Stride, Inc. (LRN - Free Report) : A Zacks Rank #1 company, has been gaining from higher enrollment and cost-saving efforts. Persistent demand for online learning options has been benefiting Stride’s top line in recent times. Investments focused on improving user experience, enhancing teacher tools and strengthening student engagement also bode well. In addition to higher enrollments and stronger-than-expected student retention, acquisitions are expected to drive growth.
The company’s earnings for fiscal 2023 are expected to fall 0.4% but the same for fiscal 2024 is likely to gain by 13.7%.
Perdoceo Education Corporation (PRDO - Free Report) : This Zacks Rank #1 company has been benefiting from an improvement in enrollment trends at both of its segments — Colorado Technical University (CTU) and American InterContinental University (AIU). Apart from higher revenues, operating efficiencies at CTU and AIU and the Trident acquisition bode well. The company’s focus on increased investments in technology and student-serving processes drives growth.
Earnings for 2023 are expected to gain 6.8% year over year. Also, the company surpassed analysts’ expectations in each of the last four quarters. PRDO has a trailing four-quarter earnings surprise of 16.3%, on average.
Grand Canyon Education, Inc. (LOPE - Free Report) : This Phoenix, AZ-based company is an education services provider to colleges and universities in the United States and has developed key technological solutions, infrastructure and operational processes to deliver superior services in these areas on a large scale. The company has been benefiting from an increase in the Grand Canyon University (GCU) traditional campus enrollments and higher revenue per student. Also, the company has been working with GCU on two main strategies (B2B and the rollout of new and relevant programs) to offset the downturn in online enrollment.
Grand Canyon Education currently carries a Zacks Rank #2 (buy). This company’s earnings estimate for 2023 is expected to register 7.2% growth from a year ago.
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American Public (APEI) Plunges 51% Post Q4 Results: Here's Why
American Public Education, Inc. (APEI - Free Report) tumbled a whopping 50.76% on Mar 15 after it reported its fourth-quarter 2022 result. Investors’ sentiment was hurt by lackluster earnings and revenue performance.
During the period, the company reported a loss of 27 cents per share versus adjusted earnings of 50 cents reported a year ago. Low contributions and increased expenses from the RU segment and the inclusion of GSUSA’s costs and expenses negatively impacted the company’s performance during the quarter.
Let’s discuss the factors impacting this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
High Costs, Low Margins: American Public has been experiencing increased costs, which is ultimately denting profitability. Total costs and expenses increased by 11.1% year over year due to the above-mentioned headwinds. Adjusted EBITDA declined 47.4% year over year. Total costs and expenses for 2022 increased 91.5% year over year and adjusted EBITDA fell 12.3% from 2021.
This increase was also attributed to the increases in employee compensation costs at HCN and Corporate and Other segments, faculty compensation costs and advertising costs in the HCN segment and an increase in graduation event costs in the APUS unit. Also, a non-cash impairment charge, information technology costs related to the multi-year technology transformation program at APUS and professional fees associated with the RU and GSUSA acquisitions in Corporate and Other added to the woes.
Tepid RU Enrollment: In particular, RU segment’s revenue declined to $60.7 million from $68.4 million reported a year ago. Total student enrollment also fell 9% due to a 23% collective decline in both nursing and non-nursing enrollment. In 2022, RU enrollment decreased 7.4% year over year due to caps on nursing student enrollment at certain campuses, reduced demand for nursing education due to record low unemployment in some markets and fewer available nursing faculty to educate and oversee clinicals.
Lackluster Guidance: In first-quarter 2023, APEI expects total revenues to be flat to up 2% and be in the range of $155.1-$157.1 million. In the same quarter, it anticipates an adjusted loss in the range of 44-51 cents per share versus an earnings of 12 cents per share. Adjusted EBITDA is anticipated to be between $2.4 million and $4.1 million, suggesting a decline of 86-76% year over year.
RU’s student enrollment is likely to fall 12% to 14,300. Nursing student enrollment is likely to fall 19% to 6,800. Non-nursing student enrollment is expected to decline 4% year over year to 7,500.
Stringent Regulations: American Public derives a significant portion of its revenues from Title IV federal aid programs. These programs are subject to stringent regulations of the Department of Education and accrediting agencies recognized by the Secretary of Education. The Title IV programs, which account for a major portion of the company’s revenues, are administered by the Department of Education. The regulations and policies of the Department of Education, state education agencies and accrediting agencies change frequently. Moreover, budget constraints in states that provide financial aid to the students of American Public could reduce the amount of aid, which may affect enrollment growth.
Key Picks
Some better-ranked stocks in the Zacks Schools industry are:
Stride, Inc. (LRN - Free Report) : A Zacks Rank #1 company, has been gaining from higher enrollment and cost-saving efforts. Persistent demand for online learning options has been benefiting Stride’s top line in recent times. Investments focused on improving user experience, enhancing teacher tools and strengthening student engagement also bode well. In addition to higher enrollments and stronger-than-expected student retention, acquisitions are expected to drive growth.
The company’s earnings for fiscal 2023 are expected to fall 0.4% but the same for fiscal 2024 is likely to gain by 13.7%.
Perdoceo Education Corporation (PRDO - Free Report) : This Zacks Rank #1 company has been benefiting from an improvement in enrollment trends at both of its segments — Colorado Technical University (CTU) and American InterContinental University (AIU). Apart from higher revenues, operating efficiencies at CTU and AIU and the Trident acquisition bode well. The company’s focus on increased investments in technology and student-serving processes drives growth.
Earnings for 2023 are expected to gain 6.8% year over year. Also, the company surpassed analysts’ expectations in each of the last four quarters. PRDO has a trailing four-quarter earnings surprise of 16.3%, on average.
Grand Canyon Education, Inc. (LOPE - Free Report) : This Phoenix, AZ-based company is an education services provider to colleges and universities in the United States and has developed key technological solutions, infrastructure and operational processes to deliver superior services in these areas on a large scale. The company has been benefiting from an increase in the Grand Canyon University (GCU) traditional campus enrollments and higher revenue per student. Also, the company has been working with GCU on two main strategies (B2B and the rollout of new and relevant programs) to offset the downturn in online enrollment.
Grand Canyon Education currently carries a Zacks Rank #2 (buy). This company’s earnings estimate for 2023 is expected to register 7.2% growth from a year ago.