Strayer shares jump as more new students enroll
HERNDON, Va.—Strayer Education Inc. reported a 33 percent drop in its first-quarter profit on Thursday but an uptick in new student enrollment sent its shares soaring.
Investors are keeping a close eye on enrollment trends at Strayer and other for-profit education companies after recent government regulations led to a broad decline in enrollment.
The number of students at for-profit schools jumped during the recession as high unemployment drove many people back to school. But enrollment fell after the U.S. Department of Education stiffened regulations last summer that forced the companies to tighten their admission standards or risk losing access to federal student aid.
Strayer said that its total student enrollment for the spring term fell 9 percent, which includes a 12 percent jump in new student enrollment and a 13 percent decline in continuing student enrollment. The new student growth came from enrollment in both its online and classroom settings, helped by the addition of several new sites during the past few years.
The rise in new student enrollment was enough to offset any investor concerns about weak financial results for the period
Strayer's stock price rose $13.25, or 15.4 percent, to $99.43 in afternoon trading. Its shares have fallen sharply since this summer when it was trading at $145.30.
The company said its net income fell to $24 million, or $2.09 per share, for the quarter ended March 31 from $35.8 million, or $2.80 per share, in the prior year's period. Revenue fell 13 percent to $149.5 million from $172 million a year ago due to the drop in enrollment, which was partially offset by a 3 percent tuition hike.
Analysts polled by FactSet anticipated the company would earn $2.10 per share on revenue of $150.4 million.
Strayer said it expects to earn $1.84 to $1.86 per share for the second quarter; analysts forecast $1.87.
"We are encouraged that it is moving in the right direction," BMO Capital Markets analyst Jeffrey Silber said in a research note Thursday. "Nevertheless, we caution investors that choppy start trends will likely continue in the near term ... as industry trends reset and schools work to find their sea legs in a new regulatory and demand environment."
Strayer, based in Herndon, Va., offers undergraduate and graduate degree programs to students online and at 92 campuses across the country under the name Strayer University.