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Why Is Strayer Education (STRA) Down 12.2% Since the Last Earnings Report?

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A month has gone by since the last earnings report for Strayer Education, Inc. (STRA - Free Report) . Shares have lost about 12.2% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Strayer Education Q2 Earnings Beat, Enrollments Up

Strayer Education reported second-quarter 2017 earnings of $0.92 per share, beating the Zacks Consensus Estimate of $0.89 by 3.4%. Also, earnings increased 28% year over year.

Revenues increased 4% to $112.7 million from $108.5 million in the same quarter last year, primarily buoyed by higher enrollment which was partly offset by lower revenues per student.

Revenue per student however declined 1.8% from the prior year quarter.

Enrollment Details

Total enrollment at Strayer University increased 6% to 43,411 students from 41,029 in the prior-year quarter. New student enrollments rose 8% and continuing student enrollments increased 5%.

Operating Results

Operating margin increased 40 basis points (bps) to 12.3%. Bad debt expenses, as a percentage of revenues, were 4.5% in the second quarter, reflecting a year-over-year increase of 70 bps.

Financial Details

Strayer Education ended the quarter with cash and cash equivalents of $147.9 million, as of Jun 30, 2017, compared with $129.2 million at 2016-end.

The company generated $32.7 million in cash from operating activities in the first half of 2017, compared with $22.4 million in the year-ago period. Capital expenditures totaled $8.4 million in the first half of 2017, compared with $3.9 million in the same period last year.

The company had $70 million worth of share repurchase authorization as of Jun 30, 2017. Notably, no shares were repurchased in the second quarter of 2017.

Q3 Guidance

Total enrollments at Strayer University are expected to grow 7% to approximately 41,600 students from the prior-year quarter.

New student enrollments are anticipated to increase approximately by 7%. Continuing student enrollments are likely to increase approximately 8%.

Revenue per student in the quarter is likely to decline between 1% and 2%.

2017 Guidance

The company expects revenue per student to decline between 1.5% and 2%.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been one revision lower for the current quarter.

Strayer Education, Inc. Price and Consensus

 

VGM Scores

At this time, the stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is equally suitable for growth and value investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are looking for a below average return from the stock in the next few months.




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