On May 26, 2015, we issued an updated research report on Strayer Education Inc. STRA.
On May 6, this education company reported first quarter 2015 results.
Strayer Education’s first quarter 2015 adjusted earnings of $1.05 came in line with the Zacks Consensus Estimate. However, it declined 21.7% year over year on soft revenues and lower margins. Total revenue of $111.9 million fell 4% due to a decline in total enrollment and revenue per student but managed to beat the consensus mark by a slight margin. New enrollments declined 1% in the quarter.
The company previously maintained in the fourth quarter 2014 conference call that total enrollment will rebound in the first or second quarter of 2015 on the back of improving starts. However, after improving in the first three quarters of 2014, starts were flat in the fourth quarter 2014 and declined in the first quarter of 2015 – contrary to management expectations.
Moreover, tuition cuts and unfavorable mix of students toward lower undergraduate tuition resulted in softer revenue per student in the past few quarters. In addition, management expects this declining trend of revenue per student to continue in fiscal 2015, which in turn can hurt overall revenues.
However, Strayer has been taking several initiatives to drive new enrollments. Many students are unable to complete their graduation programs due to high fees or related costs. Therefore, in order to encourage students to complete the programs, in Jan 2014, the board of trustees approved an approximate 20% cut in Strayer’s undergraduate tuition costs. The initiative improved college affordability and its value proposition.
Strayer carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the education industry include New Oriental Education & Technology Group Inc. EDU, Bright Horizons Family Solutions, Inc. BFAM and Grand Canyon Education, Inc. LOPE. While New Oriental Education sports a Zacks Rank #1 (Strong Buy), Bright Horizons and Grand Canyon Education hold a Zacks Rank #2 (Buy).
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