Strayer Education (STRA) Falls on Q2 Earnings & Sales Miss

Shares of Strayer Education, Inc. STRA declined 8.07% on Jul 27, after the education company reported disappointing second-quarter 2016 results despite positive enrollment levels.  

Second quarter 2016 adjusted earnings of 72 cents per share missed the Zacks Consensus Estimate of $1.04 by 30.8%. Moreover, adjusted earnings decreased 35% year over year due to weak revenues and margins. 

 

 

Total revenue of $108.5 million missed the Zacks Consensus Estimate of $114.0 million by 4.8%. In spite of an increase in total enrollment, revenues fell 1% from the comparable prior-year quarter due to lower revenue per student.

Adjusted operating margin decreased 720 basis points (bps) to 11.9% due to weak revenues and higher expenses. Bad debt expense, as a percentage of revenues, was 3.8% in the second quarter, reflecting a year-over-year increase of 60 bps owing to slower payment from corporate alliances partner.

Enrollment & Revenue Per Student

Strayer University's total enrollment rose 4% to 38,813 students for the summer term driven by a 4% increase in continuing student enrollments, and a 6% increase in new enrollment.

Revenue per student decreased 2% during the quarter owing to an unfavorable shift in mix to lower tuition undergraduates.

Other Financial Details

Strayer Education ended the quarter with cash and cash equivalents of $117.4 million, as of Jun 30, 2016, compared with $117.5 million, as of Mar 31, 2016. The company had $70 million of share repurchase authorization remaining as of Jun 30, 2016.  

Strayer Education carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the consumer discretionary sector include Apollo Education Group Inc APOL, New Oriental Education & Technology Group Inc. EDU and Barnes & Noble Education Inc BNED. All the three companies hold a Zacks Rank #2 (Buy).

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