ITT Educational Services Inc. (ESI), a provider of undergraduate and graduate degree programs in the U.S., recorded strong 35.1% growth in second-quarter earnings to $96.0 million, from $71.1 million in the year-ago quarter. Quarterly earnings per share came in at $2.78, which easily surpassed the Zacks Consensus Estimate of $2.67 as well as the year-ago earnings of $1.85 per share.
ITT Educational recorded a 26.7% growth in revenue to $401.8 million, compared to $317.1 million in the year-ago period. This growth was primarily driven by 21.2% year-over-year growth in total enrollment to 84,695 students.
Overall enrollment growth was primarily attributable to 25.5% year-over-year growth in continuing enrollment, partially offset by slower new enrollment growth of 10.1% year-over-year. The slowdown in new enrollment surprised investors as ITT Educational has posted strong new enrollment growth rates of 21.8%, 31.2%, 27.2% and 33.5% in the previous four quarters.
During the quarter, cost of educational services expense rose 20.7% year-over-year to $133.8 million, while student services and administrative expenses increased 22.7% year-over-year to $111.0 million, primarily due to higher costs related to growth in enrollments. However, the top-line growth more than offset the increase in operating expenses. Consequently, ITT Educational’s operating income logged a growth of 35.5% to $157.1 million from $115.9 million in the year-ago period.
ITT Educational ended the quarter with cash and cash equivalents of $140.5 million and long-term debt-to-capitalization of 49.4%, compared to a cash balance of $140.2 million and long-term debt-to-capitalization of 42.9% in the year-ago period. During the quarter, ITT Educational generated $87.2 million of cash from operations and utilized $115.6 million toward investments and $105.3 million toward share buybacks.
Looking ahead, ITT Educational now expects full-year earnings in a range of $11.00 to $11.35 per share, compared to the previous guidance of $10.50 to $11.25. The guidance remains in line with the Zacks Consensus Estimate of $11.12 per share, which jumped 18 cents in just the past week. However, the Zacks Consensus Estimate for 2011 has moved down 9 cents over the past 2 months to $12.37 per share.
We currently have a long-term Neutral recommendation and a short-term Zacks #3 Rank (Hold) rating on ITT Educational’s stock.
Read the full analyst report on “ESI”
Zacks Investment Research
