A month has gone by since the last earnings report for Capella Education Company . Shares have lost about 1.6% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is CPLA 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.
First-Quarter 2018 Results
The company reported adjusted earnings of $1.20 per share in the quarter, which surpassed the Zacks Consensus Estimate of $1.16 by 3.5%. In the year-ago quarter, earnings were 94 cents.
Revenues and Enrollment
Capella’s quarterly revenues of $112 million missed the Zacks Consensus Estimate of $113 million and inched up 0.2% year over year.
Capella reports under two segments — Post-Secondary and Job-Ready Skills. 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 $109.2 million, down 0.3% from the year-ago quarter’s tally due to a decline in enrollment. However, operating margin of 17.8% contracted 70 basis points (bps) year over year.
Capella University’s total active enrollment fell 1.6% to 38,181 learners, while new enrollment increased 1.8% on a year-over-year basis.
Job-Ready Skills: The segment reported revenues of $2.8 million in the first quarter, up 21.7% year over year. That said, the segment reported an operating loss of $1 million compared with a loss of $2.7 million in the prior-year quarter.
Operating income was $17.9 million compared with $17.6 million in the prior-year quarter. The operating margin was 16%, up 30 bps. In the quarter under review, the company incurred merger transaction costs of $0.5 million.
As of Mar 31, 2018, Capella Education had cash and marketable securities of $192.7 million, compared with $181.4 million at 2017-end.
Cash provided by operating activities from continuing operations for the three months ended March 31, 2018 was $21.3 million compared with $17.0 million in the year-ago quarter. No shares were repurchased in the first quarter of 2018. The company had $27 million of share repurchase authorization remaining as of Mar 31, 2018.
The company is focused on consistent revenue growth. To this end, Capella aims to achieve annual new enrollment growth along with stable or improving early cohort persistence and continued revenue growth in the Job-Ready Skills segment. Moreover, the company expects the Job-Ready Skills segment to be less dilutive in 2018. Currently, the annual tax rate is expected to be slightly above 25%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.
Capella Education Company Price and Consensus
At this time, CPLA has a strong Growth Score of A, though it is lagging a lot on the momentum front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 more suitable for growth investors than value investors.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions looks promising. Notably, CPLA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.