Capella Education 1st-quarter profit rises 43 percent

MINNEAPOLIS—Online education company Capella Education Co. said Thursday its first-quarter profit rose 43 percent, just above Wall Street's estimates, as enrollment grew.

For the three months ended March 31, the company reported income of $5.5 million, or 31 cents per share, compared with $3.8 million, or 23 cents per share, in the year-ago period.

Analysts polled by Thomson Financial, on average, estimated earnings of 30 cents per share on sales of $64.8 million.

Revenue rose 24 percent to $65.3 million from $52.8 million in the first quarter of 2007.

Total enrollment rose 23 percent in the quarter to 23,496 students.

"We think that the company can continue to attract and retain students while improving operating margins, but we believe current share prices reflect the strengths of the business and do not provide a compelling risk/reward opportunity," ThinkEquity Partners analyst James Maher wrote in a note to investors. Maher maintained an "Accumulate" or "Hold" rating on the shares and a 12-month target price of $66.

"We believe funds will be available for students, but that bad debt expenses may rise somewhat in the current economic environment," he said.

Shares plunged $3.45, or 5.4 percent, to $61.04 in afternoon trading. Shares have traded between $34.43 and $75.38 in the past 12 months.