A month has gone by since the last earnings report for Strategic Education (
STRA Quick Quote STRA - Free Report) . Shares have lost about 0.3% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Strategic Education due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Strategic Education Q4 Earnings Miss, Margin Falls
Strategic Education, Inc. or SEI reported tepid fourth-quarter 2022 results. The quarterly revenues and earnings missed their respective Zacks Consensus Estimate. Also, both the top and the bottom lines declined year over year. The downside was caused by lower contributions from USHE and ANZ segments.
Karl McDonnell, chief executive officer of SEI, stated, “As we begin a new year, we are focused on continued recovery and investing in opportunities for growth within our diversified portfolio of offerings, including strength within our Education Technology Services segment, with the mission to promote economic mobility for working adults.” Inside The Headlines
SEI reported adjusted earnings of 78 cents per share, which missed the Zacks Consensus Estimate of 94 cents by 17% and declined 32.2% from the year-ago quarter’s reported level of $1.15.
Total revenues of $269.9 million missed the consensus estimate of $271 million by 0.6% and declined 0.8% from the prior-year quarter’s level. Segment Details
SEI currently operates in three reportable segments — U.S. Higher Education or USHE, Education Technology Services (earlier known as Alternative Learning) and Australia/New Zealand or ANZ.
USHE: This segment comprises Strayer and Capella Universities. Segment’s revenues grew 0.5% year over year to $199.7 million, with higher revenues per student offsetting lower enrollment. Student enrollment declined 0.8% from the year-ago quarter’s level to 78,062 students. FlexPath enrollment was 19% of USHE enrollment, compared with 18% in the year-ago quarter. During the quarter, the adjusted operating margin declined 340 basis points (bps) to 6.6% compared with the prior-year quarter. Education Technology Services: This segment includes Employer Solutions, Workforce Edge and Sophia Learning. The segment’s quarterly revenues came in at $16.7 million, up 20.4% year over year, backed by growth in Sophia Learning subscriptions and employer-affiliated enrollment. Sophia Learning’s average total subscribers increased approximately 29% from the prior-year period’s levels. Employer-affiliated enrollment was 24.7% of USHE enrollment compared with 21.7% in the year-ago period. Its adjusted operating margin came in at 24.1% in the reported quarter, down 1,240 bps from a year ago. ANZ: This segment includes Torrens University, Think Education and Media Design School. Revenues in the segment totaled $53.5 million, down 10.2% year over year but up 0.6% on a constant-currency (cc) basis. Student enrollment within ANZ was up 3.7% to 19,651 during the reported quarter. The adjusted operating margin was 18.6% in the reported quarter, down 300 bps from the prior-year quarter’s levels. Operating Highlights
The adjusted operating margin of 10.1% declined 380 bps from the year-ago quarter’s figure. Adjusted EBITDA in the reported quarter was $45.2 million, down 19.4% from $56.1 million in the prior-year quarter.
As of Dec 31, 2022, STRA recorded cash and cash equivalents of $213.7 million compared with $268.9 million at the 2021-end.
Cash provided by operating activities was $126.1 million at 2022-end compared with $180.5 million in the comparable year-ago period. Capital expenditures were $43.2 million compared with $49.4 million a year ago. Capital expenditures for 2023 are now expected to be approximately $45 million. 2022 Highlights
In 2022, revenues declined 5.9% to $1,065.5 million compared with $1,131.7 million in 2021. Adjusted earnings of $2.51 declined from $4.83 reported in 2021.
The adjusted operating margin declined 630 bps to 8.3% in 2022 compared with 14.6% in the prior year. Adjusted EBITDA declined 31.4% to $163.1 million from the prior year’s level of $237.7 million. In 2022, student enrollment within USHE decreased 6.5% from the 2021 level. Employer-affiliated enrollment was 24.4% of USHE enrollment versus 21% in 2021. Student enrollment within ANZ increased 0.2% year over year. How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -61.44% due to these changes.
Currently, Strategic Education has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Strategic Education has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.