Capella Education Company reported earnings of 90 cents per share in the second quarter of 2017, which surpassed the Zacks Consensus Estimate of 80 cents by 12.5%. However, earnings declined 3.2% year over year.
Share price of Capella dropped 8.2% to $80.80 in the trading session following its earnings release on Jul 25.
Revenues and Enrollment
Capella’s quarterly revenues of $109.6 million fell short of the Zacks Consensus Estimate of $110 million by 0.4%. Meanwhile, revenues improved 2.7% from the year-ago level despite a decline in the rate of enrollment growth.
Capella reports under two segments – Post-Secondary and Job-Ready Skills. While the Post-Secondary segment comprises Capella University and Sophia Learning, the Job-Ready Skills segment covers Capella Learning Solutions, Hackbright Academy and DevMountain.
Post-Secondary: The segment reported revenues of $107.0 million, up 1.1% year over year in spite of a lower rate of enrollment growth. However, the operating margin of 16.6% showed a decline of 380 basis points (bps) year over year.
Capella University’s total active enrollment decreased 1.7% to 37,588 learners, while new enrollment dropped 9.6% on a year-over-year basis. Early cohort persistence improved approximately 3% year over year.
Job-Ready Skills: The segment reported revenues of $2.6 million in the second quarter, compared with $0.9 million in the prior-year quarter. The segment reported an operating loss of $2.4 million, compared with the $3.5 million loss reported in the prior-year quarter.
Capella’s operating income from continuing operations was $15.4 million, down 14.9% from the year-ago figure. Operating margin of 14.0% fell 290 bps year over year.
Capella, in the first half of 2017, generated $35.2 million in operating cash flow from continuing operations, compared with $42.8 million in the prior-year period.
Capella ended the quarter with cash and cash equivalents of $118 million, compared with $93.6 million at 2016-end.
Capital expenditures, in the first six months of 2017, totaled $12.1 million.
Revenues are expected to increase 2% to 3% year over year. Capella University’s new enrollment growth is likely to be flat year over year, while total enrollment is expected to be down about 1%.
The company’s operating margin is projected at about 11.5% to 12.5% for the quarter.
The company now expects revenue increase of about 3%, compared with its earlier projection of 3–5% growth.
Operating margins are likely to be about 15%. Earlier, the company had expected operating margins to be similar with the fiscal 2016 level of 15.9%.
Zacks Rank & Upcoming Peer Releases
Capella currently carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Public Education, Inc. APEI is scheduled to report second-quarter results on Aug 8. The Zacks Consensus Estimate for quarterly earnings is pegged at 23 cents.
Strayer Education Inc. STRA is scheduled slated to release its quarterly numbers on Jul 26. The Zacks Consensus Estimate for earnings is pegged stands at 88 cents.
Adtalem Global Education Inc. ATGE is scheduled to release its quarterly numbers on Aug 17. The Zacks Consensus Estimate for earnings is pegged at 72 cents.
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