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Why Is American Public Education (APEI) Down 1.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for American Public Education (APEI - Free Report) . Shares have lost about 1.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is American Public 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 its most recent earnings report in order to get a better handle on the important drivers.

American Public Education’s Q4 Earnings Top Estimates

American Public Education, Inc. reported mixed fourth-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate, while revenues missed the same.

The company reported earnings of 55 cents per share, surpassing the consensus mark of 52 cents by 5.8%. Also, the reported figure increased 7.8% on a year-over-year basis.

Revenues & Enrollment Discussion

Total revenues of $76.9 million lagged the consensus estimate of $77.5 million by 0.7%. Also, the reported figure decreased 1% from $78.1 million in the prior-year quarter. Lower contribution from Hondros College of Nursing (“HCN”) and American Public University System (“APUS”) impacted overall results.

Total revenues in the APEI segment came in at $66.9 million, down 1.6% from the year-ago quarter. The fall was mainly due to lower enrollments and net course registrations by new students. Total net course registration declined 1% from the year-ago quarter to 79,400. Net course registrations by new students fell 1% year over year to 9,800. As of Dec 31, 2018, APUS student enrollment declined 2% to 81,400 from the year-ago figure of 83,400.

HCN’s revenues decreased 0.8% from a year ago to $10.1 million in the reported quarter, owing to reduced enrollments. Total enrollment in HCN was in line with the prior-year figure of 2,110 students, while new student enrollment fell 4% to 660 students. The decline was mainly due to the implementation of multiple changes to its curriculum, course retake policies and admission requirements.

Operating Highlights

Total costs and expenses during the quarter inched up 0.7% year over year to $65.5 million. The rise in cost and expenses was primarily due to increased compensation costs in the HCN segment, higher advertising expenses and stock-based compensation costs across its segments. The negative impact from the same was offset by a decline in instructional material costs and employee compensation expenses in its APEI segment.

General and administrative expenses, as a percentage of revenues, grew 200 basis points, mainly due to higher compensation costs across segments.

Financials

As of Dec 31, 2018, total cash and cash equivalents totaled approximately $212.1 million compared with $179.2 million in the corresponding period of 2017. Capital expenditure amounted to roughly $9.4 million in 2018 compared with $14.8 million a year ago.

Full-Year 2018 Review

In full-year 2018, the company reported adjusted earnings of $1.54 per share, up 19.4% from the year-ago figure of $1.29. Meanwhile, adjusted earnings (excluding nearly $1.7 million in pre-tax expenses related to the voluntary reduction in force program and tax adjustment) came in at $1.62 per share. Revenues of $297.7 million slightly decreased from the year-ago figure of $299.2 million.

First-Quarter 2019 Guidance

For first-quarter 2019, the company expects total revenues in the range of flat to down 5%. Earnings are anticipated in the range of 29-34 cents per share, below the Zacks Consensus Estimate of 38 cents.

Net course registrations at APUS are projected to increase 1% and registrations by new students are expected to grow 8% from the prior-year level.

At HCN, total student enrollment is likely to decline 15% from the year-ago quarter and new student enrollment is estimated to fall about 30%. Revenues at HCN are likely to add approximately 10% to APEI's consolidated revenues in the first quarter of 2019.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a flat path over the past two months.

VGM Scores

Currently, American Public Education has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

American Public Education has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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