Strayer Education’s Profit Climbs – Analyst Blog

Strayer Education Inc. (STRA), an education service company, recently reported fourth-quarter 2009 results. Net profit for the quarter soared 32% to $31.9 million from the prior-year quarter.

 

The quarterly earnings of $2.32 per share exceeded the Zacks Consensus Estimate of $2.30, and jumped 36% from $1.71 posted in the year-ago quarter. Strayer Education, which owns the Strayer University, said it expects first-quarter 2010 earnings to be between $2.56 and $2.58 per share.

 

The current Zacks Consensus Estimate for first-quarter 2010 is $2.57 per share. In the last 30 days, the Zacks Consensus Estimate has fallen marginally by 2%, with 2 out of 17 analysts covering the stock lowering their estimates, and only one analyst raising his. The company’s earnings surprise history for the last four quarters (including the fourth-quarter), when compared to the Zacks Consensus Estimate, varies between 1% and 6%, the average being 3%.

 

Operating income for the quarter surged 33% to $52.4 million, whereas operating margin expanded 110 basis points to 35.6%. Management indicated that margins are expected to remain under pressure in first-quarter 2010 due to campus openings.

 

The company plans to open four new campuses for the 2010 spring term: two in Miami, Florida; one in New Orleans, Louisiana; and one in Austin, Texas. For 2010 winter term, the company had already opened three new campuses – two in New Jersey and one in Arkansas. Strayer Education plans to open 13 new campuses in 2010.

 

Total revenue for the quarter grew 29% to $147.2 million, buoyed by a rise in enrollment and a 5% increase in tuition fees.

 

Higher education sees a countercyclical movement in an economic recession. Post-secondary enrollments tend to rise as both unemployed and employed workers return to school to re-skill themselves and existing students remain in school for a longer duration compelled by the intensely competitive job market.

 

The educational institute, which offers degree programs in business administration, accounting, information technology, education, health care, public administration, and criminal justice, said that total enrollment for the 2010 winter term jumped 21% to 55,106 students.

 

Strayer Education ended fiscal year 2009 with cash and cash equivalents of $56.4 million and shareholders’ equity of $176.1 million, with no debt. During the year, the company generated $141.8 million in cash from operating activities. Capital expenditures for the year were $30.4 million.

 

During the quarter, Strayer Education repurchased 51,200 shares at an average price of $195.38, an aggregate of $10 million. During the fiscal year 2009, the company bought back 452,000 shares at an average price of $177.34, aggregating $80.1 million.