On Nov 20, 2014, we issued an updated research report on Capella Education Company (CPLA).
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.
Capella Education has been posting better-than-expected results for the past two quarters. However, the third quarter of 2014 stood out for the rebound in total enrollment. Total active enrollment was up 2.1% from the prior-year quarter, better than the company’s expectation of a 1% to 2% increase.
Total active enrollment, which had been declining since fiscal 2011, revived on the back of consistent starts growth and improved persistence rates. New enrollments rose 11.9% year over year in the third quarter due to increases across all programs, particularly in Master’s programs.
The third quarter also witnessed solid operating margin driven by consistent cost control and lower-than-expected marketing expenses.
Driven by the encouraging results, the company 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 in the 3% range. Operating margin is expected in the range of 17% to 18% for the fourth quarter.
Capella sports a Zacks Rank #1 (Strong Buy).
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). All the three companies sport a Zacks Rank #1.
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