American Public Education: A Strong Sell as Estimates Fall

On Mar 11, Zacks Investment Research downgraded American Public Education, Inc. APEI to a Zacks Rank #5 (Strong Sell).

Estimates for this post-secondary education provider have gone down since the company issued a disappointing outlook for the first quarter of 2015 at the fourth quarter 2014 conference call held on Feb 26.

Why the Downgrade?

Though the macroeconomic trends are improving, the company expects its first quarter 2015 performance to be impacted by persistent volatility and softness in enrollment of students using Federal Student Aid (FSA) and Tuition Assistance (TA) benefits.

Management expects first-quarter 2015 total enrollments at its wholly owned subsidiary, American Public University System, Inc. (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.

This outlook is a huge contrast to the better-than-expected earnings and revenues that the company has been reporting during the past four quarters of 2014. However, these trends were mostly driven by the inclusion of sales from Hondros against the absence of any such revenues last year.

Meanwhile, new enrollments at APUS have been declining year over year in the past few quarters, adversely impacted by continued volatility and softness in military enrollments. Moreover, a significant slowdown in enrollments of students using FSA hurt APUS enrollments in the past two quarters.

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).

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