Strayer Earnings Beat Despite Y/Y Decline - Analyst Blog

Strayer Education Inc. (STRA) posted first-quarter 2013 earnings of $1.59 per share, beating the Zacks Consensus Estimate of $1.46 by 8.9%. Earnings were also better than the company's expected range of $1.45 – $1.47 per share. However, earnings plunged significantly, by 24%, from $2.09 reported in the year-ago period due to top-line decline.

Total revenue in the quarter dropped 8% from the comparable prior-year quarter to $137.5 million due to lower enrollments and revenue per student. Total revenue also missed the Zacks Consensus Estimate of $140 million.

Quarter in Detail

Strayer University's total enrollment for the 2013 spring term declined 9% to 46,130 students due to decline in both continuing student enrollments and new student enrollment. Continuing student enrollments went down 8% year over year while new student enrollments declined 14%.

Operating income in the quarter plummeted 27% to $29.9 million. The operating margin contracted 550 basis points to 21.8% due to decline in revenues and higher bad debt expenses. Bad debt expense as a percentage of revenues was 4.0% in the first quarter, up 20 basis points from the prior-year quarter.

Other Financial Details

Strayer Education ended the quarter with cash and cash equivalents of $50.8 million as of Mar 31, 2013 compared to $47.5 million as of Dec 2012. During the quarter, the company repurchased stocks worth $25 million. As of Mar 31, 2013, the company had $70 million worth of stocks left under its share repurchase authorization.  

Outlook

Strayer Education expects second-quarter 2013 earnings in the range of $1.37 – $1.39 per share, based on the enrollment for the spring term of 2013.

Strayer Education carries a Zacks Rank #4 (Sell). This post-secondary education company has been witnessing decline in enrollments over the past few months due to continued unemployment, overall economic downturn and a subsequent decline in student demand due to lower confidence in job prospects.

However, education stocks such as ChinaEdu Corporation (CEDU), New Oriental Education & Technology Group (EDU) and TAL Education Group (XRS) are currently performing well and are worth considering. All the three companies hold a Zacks Rank #2 (Buy).