American Public Education, Inc.’s (APEI - Free Report) banks on affordable tuitions, online programs, strategic initiatives along with its strong digital marketing campaigns to drive growth.
However, lower revenues and declining enrollment trend are hurdles. Also, the company’s tepid view for third-quarter earnings and revenues are additional woes. Evidently, shares of American Public Education have declined 22% year to date against the industry’s rally of 26.8%.
Let’s delve into the factors that substantiate the company’s Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Strategies to Drive Growth
The company has undertaken several initiatives to improve enrollment trends and student consistency. It has expanded the use of ClearPath by Fidelis — American Public’s advising and mentoring platform — to boost student engagement. It has also revised its application and assessment processes to effectively enroll more students with greater college readiness.
Notably, American Public launched competency-based programs under an initiative — APUS Momentum. Other important initiatives include APU mobile app and Civitas that aims to provide better access to classroom resources and improvement of students’ persistence.
Meanwhile, Hondros College of Nursing (HCN) has brought about changes in curriculum that are expected to boost student enrollment. In April 2019, HCN started providing classes for the Medical Laboratory Technician program or MLT Program at Cincinnati and Columbus campuses. The company is planning to launch a branding campaign and start new campuses by 2020.
The company has also adopted a geographical approach to marketing, which focuses on using cost-effective channels and aims to reach out to college ready students who are more likely to succeed. Also, it aims to strengthen its digital marketing campaigns to leverage relationship with military, public service and other high-value student populations.
American Public Education is struggling against lower revenues resulting from declining enrollment trends across the board. It also expects total consolidated revenues to decline in the range of 7-11% in the third quarter.
Enrollment of students using Federal Student Aid or FSA has been declining ever since the company shifted focus toward improving the quality mix of students. The downside in enrollment of students using FSA was also caused by the implementation of new admission processes, intense competition in the market place and adjustments in marketing activities.
In the first and the second quarter of 2019, net course registrations by new students using FSA declined 9.3% and 9.7%, respectively, year over year. Also, net course registrations by new students utilizing veterans’ benefits or VA fell 6.8% and 8.4% respectively, during the said periods.
Student enrollment in the segment also declined 2% and 1% in the first and the second quarter, respectively. For the third quarter, the company expects net course registrations at APUS to decline in the band of 10-15% year over year.
Due to the above-mentioned headwinds, the company expects the bottom line between a loss of 2 cents and earnings of 3 cents per share for the third quarter.
Some better-ranked stocks in the Zacks Schools industry are Career Education Corporation (CECO - Free Report) , Lincoln Educational Services Corporation (LINC - Free Report) and Afya Limited (AFYA - Free Report) . Career Education and Lincoln Educational Services sport a Zacks Rank #1 (Strong Buy), while Afya Limited carries a Zacks Rank #2 (Buy).
Career Education has an average earnings surprise of 20.7% in the trailing four quarters.
Lincoln has an expected earnings growth rate of 155.6% for 2019.
Afya’s three-five year expected EPS growth rate is pegged at 46.6%.
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