American Public Education, Inc. (APEI) delivered better-than-expected revenues and earnings in the fourth quarter of 2014 for the second consecutive quarter.
However, the post-secondary education provider issued a disappointing outlook for the next quarter, expecting a year-over-year decline in earnings and revenue.
American Public’s fourth-quarter earnings of 68 cents per share beat the Zacks Consensus Estimate of 53 cents by 28.3% and increased 33% year over year. Earnings exceeded management’s expected range of 50 cents–54 cents. Strong earnings results were driven by solid revenue and improvement in enrollment trends.
Revenues and Enrollment
Total revenue increased 10% year on year to $91.3 million, beating the Zacks Consensus Estimate of $90.0 million by 1.4%. Top-line growth was much better than management’s expectation of 7% to 9% increase, due to solid revenue at both the segments, American Public University System, Inc. (APUS) and Hondros College, Nursing Programs (HCON).
Revenues increased 5.1% at APUS to $83.1 million, due to improved enrollment trends. Revenue at Hondros College of Nursing was $8.3 million, up significantly from $3.8 million in the prior-year quarter.
Total enrollment at APUS increased 7% year over year to 101,800, owing to increase in students using military tuition assistance. Also, the prior-year quarter results were impacted by partial government shutdown that temporarily prevented active-duty military students from using Tuition Assistance (TA) benefits in October 2013. Absence of such an event improved enrollment levels at APUS during the quarter.
However, new student enrollments (student starts) at APUS decreased 6% to 19,000. Like the past few quarters, APUS enrollments in the reported quarter were adversely impacted by significant slowdown in enrollments of students using federal student aid (FSA).
Total enrollments at the newly acquired Hondros rose 11% in the quarter to 1,470 students, while starts improved 16%. Strong demand for nursing education and management’s efforts to improve student engagement and activity through the expanded use of social media and by building strategic relationships improved Hondros’ enrollment trends.
Operating margin for the quarter increased on the back of decline in payroll costs, improved cost management and better operating leverage.
Selling and promotional (S&P) expenses as a percentage of revenues improved 170 basis points (bps) to 18.9% of revenues as higher revenue improved operating leverage.
Instructional costs and services improved 40 bps to 34.6% of revenues due to decline in payroll costs and lower course material costs.
First-Quarter 2015 Outlook
Though the macroeconomic trends are improving, the company apprehended its first quarter 2015 to be impacted by persistent volatility and softness in enrollment by students using Federal Student Aid and TA.
Management expects first-quarter 2015 total enrollments at APUS to decrease in the range of 7% to 4%, while student starts are expected to decline between 18% and 13% year over year.
American Public expects revenues to decrease between 5% and 3% year over year. Management further projects first-quarter 2015 earnings between 46 cents and 50 cents, lower than 59 cents in the prior-year quarter and Zacks Consensus estimate of 62 cents.
Management also stated that new student enrollments at Hondros will increase approximately 14% in first-quarter 2015.
American Public carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the education industry include Universal Technical Institute, Inc. (UTI), Grand Canyon Education, Inc. (LOPE) and National American University Holdings, Inc. (NAUH). While Universal Technical Institute sports a Zacks Rank #1 (Strong Buy), National American University and Grand Canyon Education carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment