Share prices of ITT Educational Services Inc. (ESI) soared 65% on Oct 17 as the education company reported preliminary operational information for the second and third quarters of 2014.
The share price soared as the company’s preliminary results were better than what the market had anticipated. Investors were also encouraged by the fact that the company finally filed its 10K for the fourth quarter of 2013 with U.S. Securities and Exchange Commission (SEC) and provided a time estimate for the pending filing for the past three quarters of 2014. The company also provided a decent fourth quarter 2014 outlook, as the rate of new enrollment decline in the quarter is expected to be lower than in the rest of 2014.
Second Quarter 2014
The provider of postsecondary degree programs reported that new enrollments declined 8.1% in the second quarter of 2014.. Total enrollment declined 5.3% to 55,485 students. However, the persistence rate improved 160 basis points to 70.0%.
Third Quarter 2014
During third quarter 2014, the company witnessed 9.5% decline in new enrollment to 18,377 students. Management believes that the decline in new enrollment in the third quarter was due to the impact of an 11% decline in the number of admission representatives, who are responsible for conversion of inquires to new enrollments.
New student enrollment rose 22.4% in the Breckinridge School of Nursing and Health Sciences. However, the company witnessed declining new enrollment levels in the School of Information Technology; School of Business; School of Electronics Technology; School of Drafting and Design; and School of Criminal Justice during the third quarter of 2014.
Total enrollment declined 6.3% during the quarter to 57,172 students. However, the persistence rate improved 50 basis points to 69.9%.
As of Sep 30, 2014, the education company has decent cash and cash equivalent and restricted cash of $206.9 million.
Outlook for the Fourth Quarter of 2014
During the ongoing fourth quarter of 2014, the company has increased the number of admission representatives. However, the number is still 9% lower than the year-ago level. New students enrollment is expected to decline in the range of 2% and 7%. The company expects cash and cash equivalents to be about $100 million as of Dec 31, 2014.
SEC Filings
On Oct 16, ITT Educational filed 10K for the fourth quarter of 2013. We note that company failed to file its earnings since the fourth quarter of 2013 owing to uncertainty related to the accounting treatment of the PEAK Private Student Loan Program in the company’s financial statements.
ITT Educational Services expects to file 10-Q form for the first and second quarters of 2014 on or about Nov 15, 2014 and for the third quarter of 2014 on or about Dec 15, 2014.
ITT Educational carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the education industry worth considering include GP Strategies Corp. (GPX), Lincoln Educational Services Corporation (LINC) and Universal Technical Institute, Inc. (UTI). While GP Strategies sports a Zacks Rank #1 (Strong Buy), Lincoln Educational Services Corporation and Universal Technical Institute, both carry a Zacks Rank #2 (Buy).
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