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Why You Must Hold Strategic Education (STRA) Despite 14% Fall
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Strategic Education, Inc.’s (STRA - Free Report) shares fell 14.1% post its first-quarter 2023 earnings release compared with the Zacks Schools industry’s 5.7% decline. The tepid price performance is mainly due to lackluster results in the first quarter.
STRA’s quarterly earnings and revenues declined by 55.6% and 0.9% year over year, respectively. The downside was caused by lower contributions from the Australia/New Zealand or ANZ segment. The segment, which includes Torrens University, Think Education and Media Design School, posted revenues of $41.5 million, down 14.4% year over year (8.3% on a constant-currency basis). This downtrend was due to the timing of the first academic term of the year. Student enrollment within ANZ also declined 6.3% from the prior-year quarter. The adjusted loss from operations was $7.2 million in the reported quarter compared with $0.7 million loss in the prior-year quarter.
This post-secondary education provider is also ailing from higher instructional and support costs, which rose 370 basis points (bps) in first-quarter 2023, owing to increases in bad debt expenses and student material and technology-related costs. General and administrative expenses expanded by 60 bps during first-quarter 2023, due to increased investments in branding initiatives and partnerships with brand ambassadors. The company expects expenses to rise by about 3% in 2023.
Image Source: Zacks Investment Research
For 2023, the Zacks Consensus estimates for earnings are pegged at $2.96, which moved 19 cents south in the past month. Revenues are likely to grow just 3.8% year over year.
The company also incurred a $3.6 million right-of-use lease asset impairment charge and higher severance and other personnel-related expenses from involuntary employee terminations.
Additionally, seasonal fluctuations (July through September) and risks related to Title IV program integrity regulations are potential headwinds.
To overcome these headwinds, Strategic Education has been increasing investments in marketing and other efforts. Digital learning platforms, competency-based learning model and direct assessment capabilities also bode well. Notably, high contributions from the U.S. Higher Education (USHE) and Education Technology Services segments during first-quarter helped the company offset these headwinds to some extent.
STRA expects total enrollment growth within the USHE and the Education Technology Services segments and remains optimistic about the ANZ segment as conditions normalize. Per the consensus mark, its 2023 earnings reflect 17.9% year over year growth.
The company’s cash position appears to be comparatively healthy. As of Mar 31, 2023, the company had cash and cash equivalents and marketable securities of $240 million, up from $222.8 million at 2022-end. Long-term debt was $101.3 million, on par with 2022-end. The company has no short-term obligations and no significant debt maturity until November 2025.
Zacks Rank & Key Picks
Currently, Strategic Education carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates a rise of 48.3% and 160.5%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 153.1%, on average. Shares of TCOM have increased 42.7% in the past year.
The Zacks Consensus Estimate for TCOM’s 2023 sales and EPS indicates a rise of 76.9% and 334.5%, respectively, from the year-ago period’s levels.
Bluegreen Vacations Holding Corporation carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 24.7%, on average. Shares of BVH have increased 8.7% in the past year.
The Zacks Consensus Estimate for BVH’s 2023 sales and EPS indicates a rise of 3.6% and 17.6%, respectively, from the year-ago period’s levels.
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Why You Must Hold Strategic Education (STRA) Despite 14% Fall
Strategic Education, Inc.’s (STRA - Free Report) shares fell 14.1% post its first-quarter 2023 earnings release compared with the Zacks Schools industry’s 5.7% decline. The tepid price performance is mainly due to lackluster results in the first quarter.
STRA’s quarterly earnings and revenues declined by 55.6% and 0.9% year over year, respectively. The downside was caused by lower contributions from the Australia/New Zealand or ANZ segment. The segment, which includes Torrens University, Think Education and Media Design School, posted revenues of $41.5 million, down 14.4% year over year (8.3% on a constant-currency basis). This downtrend was due to the timing of the first academic term of the year. Student enrollment within ANZ also declined 6.3% from the prior-year quarter. The adjusted loss from operations was $7.2 million in the reported quarter compared with $0.7 million loss in the prior-year quarter.
This post-secondary education provider is also ailing from higher instructional and support costs, which rose 370 basis points (bps) in first-quarter 2023, owing to increases in bad debt expenses and student material and technology-related costs. General and administrative expenses expanded by 60 bps during first-quarter 2023, due to increased investments in branding initiatives and partnerships with brand ambassadors. The company expects expenses to rise by about 3% in 2023.
Image Source: Zacks Investment Research
For 2023, the Zacks Consensus estimates for earnings are pegged at $2.96, which moved 19 cents south in the past month. Revenues are likely to grow just 3.8% year over year.
The company also incurred a $3.6 million right-of-use lease asset impairment charge and higher severance and other personnel-related expenses from involuntary employee terminations.
Additionally, seasonal fluctuations (July through September) and risks related to Title IV program integrity regulations are potential headwinds.
To overcome these headwinds, Strategic Education has been increasing investments in marketing and other efforts. Digital learning platforms, competency-based learning model and direct assessment capabilities also bode well. Notably, high contributions from the U.S. Higher Education (USHE) and Education Technology Services segments during first-quarter helped the company offset these headwinds to some extent.
STRA expects total enrollment growth within the USHE and the Education Technology Services segments and remains optimistic about the ANZ segment as conditions normalize. Per the consensus mark, its 2023 earnings reflect 17.9% year over year growth.
The company’s cash position appears to be comparatively healthy. As of Mar 31, 2023, the company had cash and cash equivalents and marketable securities of $240 million, up from $222.8 million at 2022-end. Long-term debt was $101.3 million, on par with 2022-end. The company has no short-term obligations and no significant debt maturity until November 2025.
Zacks Rank & Key Picks
Currently, Strategic Education carries a Zacks Rank #3 (Hold).
Some other top-ranked stocks from the Zacks Consumer Discretionary sector are:
Royal Caribbean Cruises Ltd. (RCL - Free Report) carries a Zacks Rank #1. RCL has a trailing four-quarter earnings surprise of 26.4%, on average. Shares of RCL have gained 36.1 in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates a rise of 48.3% and 160.5%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 153.1%, on average. Shares of TCOM have increased 42.7% in the past year.
The Zacks Consensus Estimate for TCOM’s 2023 sales and EPS indicates a rise of 76.9% and 334.5%, respectively, from the year-ago period’s levels.
Bluegreen Vacations Holding Corporation carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 24.7%, on average. Shares of BVH have increased 8.7% in the past year.
The Zacks Consensus Estimate for BVH’s 2023 sales and EPS indicates a rise of 3.6% and 17.6%, respectively, from the year-ago period’s levels.