Strategic Education (STRA) Q1 Earnings Lag, Enrollment Low

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Strategic Education, Inc. or SEI STRA reported lackluster results for first-quarter 2022. Earnings and revenues missed the Zacks Consensus Estimate and declined on a year-over-year basis due to lower contributions from all three segments.

Shares of the company fell 4.34% on Apr 29, post earnings release.

Inside The Headlines

SEI reported adjusted earnings of 54 cents per share, which missed the Zacks Consensus Estimate of 74 cents by 27% and declined 64.7% from the year-ago quarter’s levels.

Strategic Education Inc. Price, Consensus and EPS Surprise

Strategic Education Inc. Price, Consensus and EPS Surprise

Strategic Education Inc. Price, Consensus and EPS Surprise

Strategic Education Inc. price-consensus-eps-surprise-chart | Strategic Education Inc. Quote

Total revenues of $258.9 million lagged the consensus estimate of $262 million by 1.3% and declined 10.8% from the prior-year quarter’s level. Adjusted revenues fell 11.5% year over year.

Segment Details

SEI currently operates in three reportable segments — U.S. Higher Education or USHE, Education Technology Services or ETS (earlier known as Alternative Learning) and Australia/New Zealand or ANZ.

The USHE segment comprises Strayer and Capella Universities. Segment’s revenues fell 13.6% year over year to $195.8 million due to lower fourth-quarter enrollment and revenue-per-student. Student enrollment declined 12.6% from the year-ago quarter’s level to 78,172 students. FlexPath enrollment was 20% of USHE enrollment compared with 17% in the same period of 2021. The segment’s operating margin contracted significantly to 7.9% from 21.1% a year ago.

The ETS segment includes Employer Solutions, Workforce Edge and Sophia Learning. The segment’s quarterly revenues came in at $14.6 million, up 16.4% year over year, backed by growth in Sophia Learning subscriptions. Employer affiliated enrollment was 23% of USHE enrollment compared with 20.7% in the year-ago period. Its operating margin came in at 32.3% for the reported quarter, down from 47% a year ago.

The ANZ segment includes Torrens University, Think Education and Media Design School. Revenues in the segment totaled $48.5 million, down 5.4% year over year and 9.3% on an adjusted basis. Adjusted loss from operation was $0.7 million in the reported quarter, in line with the prior-year quarter’s levels. Student enrollment within ANZ fell 4.2% to 20,575 during the reported period.

Operating Highlights

The adjusted operating margin of 7.5% was down 1,060 basis points from the year-ago quarter’s figure of 18.1%. Adjusted EBITDA in the reported quarter was $38.4 million, down 45.6% from $70.6 million in the prior-year quarter.

Financial Details

As of Mar 31, 2022, STRA recorded cash and cash equivalents of $293.4 million compared with $268.9 million at 2021-end.

Cash provided by operating activities was $78.8 million in the first quarter of 2022 compared with $56.6 million in the comparable year-ago period. Capital expenditures were $9.7 million compared with $12.7 million a year ago. Capital expenditures for 2022 are expected to be approximately $50 million.

Zacks Rank & Key Picks

SEI currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Consumer Discretionary sector are Funko, Inc. FNKO, Bluegreen Vacations Holding Corporation BVH and Clarus Corporation CLAR.

Funko sports a Zacks Rank #1 at present. FNKO has a trailing four-quarter earnings surprise of 96.2%, on average.

The Zacks Consensus Estimate for Funko’s current financial year sales and EPS suggests growth of 22.6% and 26.8%, respectively, from the year-ago period’s reported levels.

Bluegreen Vacations sports a Zacks Rank #1 at present. BVH has a trailing four-quarter earnings surprise of 425.1%, on average.

The Zacks Consensus Estimate for BVH’s current financial year sales and EPS indicates growth of 8.3% and 20.8%, respectively, from the year-ago period’s reported levels.

Clarus sports a Zacks Rank #1 at present. The company has a trailing four-quarter earnings surprise of 12.3%, on average.

The Zacks Consensus Estimate for CLAR’s 2022 sales and EPS suggests growth of 25.3% and 23.1%, respectively, from the year-ago period’s levels.

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