Grand Canyon Education Inc. (LOPE) posted second-quarter 2010 results after the closing bell on Monday. The company’s earnings surged 62.2% to $12.4 million or 27 cents per share from $7.6 million or 17 cents per share in the year-ago quarter. Quarterly earnings also surpassed the Zacks Consensus Estimate of 24 cents.
However, shares of Grand Canyon slipped more than 10% in Tuesday trading on the Nasdaq as concerns loomed over ongoing investigations by federal authorities on for-profit colleges. Last week, the company received a request from the Senate Committee on Health, Education, Labor and Pensions for providing detailed information on financial results, usage of Federal resources, enrollment and student debt-levels. Grand Canyon is required to furnish a part of the information this month and the rest in September.
Quarterly Details
Meanwhile, Grand Canyon’s revenues during the quarter recorded a robust 55.0% growth to $97.5 million from $62.9 million in the year-ago period. The growth was primarily driven by a 31.5% increase in total enrollment to 36,301 students. Higher tuition fees also aided overall revenue expansion in the quarter.
Grand Canyon’s instructional costs and services expenses rose 77.2% to $36.2 million, compared to $20.4 million in the prior-year quarter, mainly due to higher expenses related to instructional and faculty compensation, system conversion and instructional supplies. Selling and promotional expenses increased 39.8% year-over-year to $29.0 million, primarily attributable to higher marketing spending, including recruitment of marketing and enrollment staff.
General and administrative expenses increased 34.4% year-over-year to $11.7 million due to higher bad debt expense and employee compensation. However, strong revenue growth more than offset the increase in operating expenses. Accordingly, Grand Canyon’s operating income surged 57.7% to $20.5 million from $13.0 million in the year-ago quarter.
Balance Sheet and Cash Flow
Grand Canyon ended the quarter with cash and cash equivalents of $43.4 million and long-term debt of $25.0 million, compared to $24.7 million of cash and $25.6 million of long-term debt in the year-ago period. During the first half of 2010, the company generated $30.1 million of cash from operations and deployed $22.4 million towards capital expenditure.
Guidance and Zacks Consensus
Moving forward, Grand Canyon now expects earnings of $1.22 to $1.28 per share on revenues of $403 million to $408 million for 2010, compared to the earlier prediction of earnings of $1.21 to $1.27 per share on revenues of $397 million to $405 million. The revised guidance remains in line with the Zacks Consensus Estimate of $1.24 per share, which dipped a penny over the past 2 months.
For the third quarter, Grand Canyon anticipates earnings of 28 cents to 30 cents per share on revenues of $101 million to $103 million. The forecast is also in line with the Zacks Consensus Estimate of 30 cents per share, which moved down 2 cents in just the past week.
We currently have a short-term Zacks #3 Rank (Hold) rating on the stock.
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