Lincoln Educational Services Corporation (LINC) reported two record quarters in a row and raised guidance as its student population swelled. It has surprised on estimates 4 quarters in a row by an average of 125.28%. LINC is trading with a PEG ratio of just 0.90.

Company Description

Lincoln Educational Services began as a Technical Institute more than 60 years ago and now offers post-high school offerings in five areas of study: automotive technology, health sciences, skilled trades, business and information technology and hospitality services.

It operates 43 campuses in 17 states under a variety of brand names including Lincoln College of Technology, Lincoln Technical Institute, Nashville Auto-Diesel College, Southwestern College, Euphoria Institute of Beauty Arts and Sciences, and the Connecticut Culinary Institute, among others.

Lincoln Saw Record Revenues in the Second Quarter

On Aug 5, Lincoln reported second quarter results that saw record earnings per share and revenues. The company surprised on earnings by 35% reporting 27 cents compared to the Zacks Consensus Estimate of 20 cents. It easily surpassed the year ago number of 5 cents per share.

Revenues soared 50.6% to $128.1 million from $85.1 million in the year ago quarter.

The company is operating on all cylinders as people look to return to school during the economic downturn.

The average student population increased by 42% year over year. On a same school basis, it rose 28.8% compared to the second quarter of 2008. The company doesn’t seen any significant changes in the macroeconomic environment it operates in that would impact the second half of 2009.

Lincoln completed its acquisition of Clemens College, a regional accredited college, during the quarter. Combined with its Briarwood College, also a regional accredited college, the company is looking to use these schools as a base from which to expand its on-line programs.

It expects to launch the on-line initiative in full in the second quarter of 2010.

Lincoln Raised 2009 Guidance

Given the record revenues in the second quarter, the company raised its previously issued full-year guidance to a range of $1.40 to $1.45 from $1.25 to $1.30 per share which represents growth of 79% to 86% over 2008.

The company also forecast third quarter EPS between 34 and 36 cents.

Zacks Consensus Estimates Rise

Given the increased guidance, covering analysts scrambled to raise estimates in the last 60 days.

The third quarter Zacks Consensus Estimate jumped to the high end of the company’s range at 36 cents per share from 30 cents before the guidance.

The 2009 Zacks Consensus Estimate recently rose a penny to $1.43 per share. Analysts expect year over year revenue growth of 82.78%.

Value Fundamentals

Lincoln Educational Services Corp. is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 14.6 and a price-to-book ratio of 2.71. The company also has a solid 5-year average return on equity (ROE) of 11.44%.

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