Lincoln Educational Slips to Strong Sell - Analyst Blog

On Mar 25, Zacks Investment Research downgraded Lincoln Educational Services Corp. LINC to a Zacks Rank #5 (Strong Sell), following announcement of disappointing fourth quarter 2013 results and a bleak guidance for the upcoming first quarter 2014.

Why the Downgrade?

Despite beating the Zacks Consensus Estimate, Lincoln Educational posted wider loss than the year ago quarter. The company has been witnessing weak enrollment growth for some time. The company also closed five of its campuses, as of Dec 31, 2013 and it expects this trend to continue in 2014.

Lincoln Educational's fourth quarter 2013 adjusted earnings of 14 cents declined 41.7% year over year due to high single-digit decline in the top line.

Revenues of $88.5 million lagged the Zacks Consensus Estimate of $91 million by 2.7% and declined 8.8% year over year to $88.5 million. The decline in revenues was due to an 11.6% drop in student enrollment resulting from student uncertainty over debt. The student starts declined 7.2% year over year during the quarter.
 
The company expects the soft trend of top line to continue in first quarter 2014. The revenue is expected to range from $77 million to $79 million, which represents a year over year decline of 10.9%. Net loss per share is expected to range from 57 cents to 60 cents, which is significantly wider than the prior year loss of 17 cents. However, the student starts are expected to rise in the range of 1% to 3% year over year.   

A couple of other education companies, witnessing weak enrollment trends in the last reported quarter are Universal Technical Institute, Inc. UTI and Apollo Education Group Inc. APOL.

Other Stocks to Consider

Investors interested in the education sector can also consider Strayer Education Inc. STRA, which sports a Zacks Rank #1 (Strong Buy).