Capella Education Rides on Solid Performance, Ups Dividend - Analyst Blog

Capella Education Company (CPLA) has been exceeding market expectations for the past two quarters. In fact, in the recently reported third quarter 2014, the company witnessed a rebound in total enrollment.

Given the improving dynamics, the company's board of directors recently approved a 5.7% hike in quarterly dividend from 35 cents to 37 cents. A quarterly cash dividend of 37 cents per share will be paid on Jan 15, 2015 to shareholders as of Dec 24, 2014.

The hike in cash dividend also indicates the company's strong cash position. As of Sep 30, 2014, Capella had cash and marketable securities of $160.3 million, and no debt for the same period.

On Oct 28, this online post-secondary education services provider reported better-than-expected results for the third quarter of 2014. Capella's earnings of 62 cents per share beat the Zacks Consensus Estimate by 12.7% and increased 29.2% year over year owing to higher revenues.  

Exceeding the company's expectation of 1% to 2% increase, revenues of $103.1 million went up 2.4% year over year and also beat the Zacks Consensus Estimate by 1.1%.  Higher tuition fee and improvement in total enrollment contributed to revenues despite an unfavorable degree mix

This Zacks Rank #1 (Strong Buy) education company also provided a positive outlook for the fourth quarter of 2014. Total enrollment is expected to increase about 3% whereas new enrollments are expected to increase at the same rate as the second and third quarters of 2014.

Revenues are expected to increase around 3%. Operating margin is expected in the range of 17% to 18% for the fourth quarter.

Key Picks from the Sector

Some other stocks worth considering in the education sector include Strayer Education Inc. (STRA), GP Strategies Corp. (GPX) and Grand Canyon Education, Inc. (LOPE). While Strayer Education and Grand Canyon Education sport a Zacks Rank #1. GP Strategies carries a Zacks Rank #2 (Buy).