Strategic initiatives have been aiding American Public Education, Inc.’s (APEI - Free Report) performance over the last few quarters. Also, affordable courses and online programs are adding to the positives.
The company — which shares space with GP Strategies Corporation (GPX - Free Report) , Bright Scholar Education Holdings Limited (BEDU - Free Report) and New Oriental Education & Technology Group Inc. (EDU - Free Report) in the same industry — reported better-than-expected revenues in fourth-quarter 2019. However, earnings were in line with estimates.
Both the metrics declined year over year due to lower contribution from its segments. Volatility and softness in enrollment by students using Federal Student Aid (“FSA”) and veterans benefits (“VA”), along with stringent regulation are concerns. Shares of American Public Education have declined 21.9% so far this year, underperforming the industry’s 20% decline.
Let’s delve deeper into the factors that substantiate its Zacks Rank #3 (Hold). You can the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Major Growth Drivers
American Public has undertaken several initiatives to improve enrollment trends and students’ persistence. The company has improved the quality of student mix, introduced new tools for students, and taken measures to increase students’ engagement and classroom interactivity. Also, it has launched competency-based programs under an initiative called APUS Momentum. The company believes that greater students’ persistence will lead to improved online learning experience, increased graduation rates and higher referral rates.
In fourth-quarter 2019, APUS’ total and net course registrations grew 1% year over year. For first-quarter 2020, net course registrations at APUS are expected to increase 1% year over year.
It has refined its marketing strategies with predictive modeling techniques, in order to reengineer enrollment management processes. Also, the company aims at sharpening digital marketing campaigns to leverage its relationships with military and other high-value student populations.
American Public continues to be a leader in terms of affordability and value. Per the 2019 study by Georgetown University Center of Education, APUS comes within the top 2% of the total U.S. colleges in terms of delivering value, i.e. net present value of future earnings and affordability.
Causes of Concerns
APUS sales and enrollment have been declining over the last few quarters, owing to continued softness in enrollment by students using FSA and VA.
In fourth-quarter 2019, net course registrations by new students using FSA declined 4% year over year. Also, net course registrations by new students utilizing veterans’ benefits or VA fell 6.8% and 8.4%, respectively, during the first and second quarters of 2019.
American Public is experiencing increased costs and expenses. In 2019, costs and expenses — as a percentage of revenues — increased 650 basis points year over year. Also, adjusted earnings declined nearly 33% year over year from 2018. The decrease is primarily attributable to increased start-up costs, and higher advertising and technology-related expenses.
For first-quarter 2020, the company anticipates earnings within 13-18 cents per share, indicating a significant decline from the year-ago reported figure of 32 cents.
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