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American Public (APEI) Down 31% in Last 3 Months: Here's Why
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American Public Education, Inc. (APEI - Free Report) tumbled 30.8% in the past year compared with the Zacks Schools industry’s 2.8% fall and S&P 500 index’s 7.3% decline. The company has been grappling with higher costs and expenses associated with acquisitions and interest and lower enrollment.
In the last reported quarter, the top and the bottom line missed the Zacks Consensus Estimate. Although revenues increased, earnings declined on a year-over-year basis due to increased costs and expenses. Total costs and expenses increased nearly 92% year over year to $149.5 million due to the inclusion of RU.
Let’s discuss the factors impacting this Zacks Rank #4 (Sell) company.
Over the last few quarters, American Public has been experiencing increased costs, which are denting profitability. For the first quarter, total costs and expenses increased nearly 92% year over year to $149.5 million due to the inclusion of RU.
The company is also witnessing increased professional fees in the APUS segment, employee compensation costs, bad debt expenses, instructional materials costs and advertising costs in the HCN segment. Also, professional fees primarily related to the integration planning of the Rasmussen added to the woes.
Low Enrollment Poses Concern
American Public’s APUS segment has been suffering from poor Army's new tuition assistance portal experience. On Mar 8, 2021, Army’s old Tuition Assistance or TA system, GoArmyEd, was replaced with the new system, ArmyIgnitED. Due to data transfer issues, it was taken back offline and then again brought online on Jul 19.
In 2021, APUS net course registrations dropped 2.2% year over year due to the temporary suspension and disruption of the Army’s TA program (beginning Feb 2021), owing to delays in the transition from GoArmyEd to ArmyIgnitED and moderation in near-term demand for online education as the COVID-19 pandemic eased.
The trend continued in first-quarter 2022 as well. Despite enrollment growth of 1.2% revenues declined due to the timing of registrations during the quarter. Also, lower revenue per net course registrations led to the decline, given a change in mix to military registrations, which generate lower revenue per registration than non-military registrations.
Lower Projections
Due to the above-mentioned headwinds, the company expects total net course registrations at APUS to decline 2-1% year over year for the second quarter. RU’s student enrollment is likely to fall 6% from the year-ago quarter’s figure to 15,900 (due to a 2% decline in Nursing and a 10% fall in Non-Nursing). It anticipates the bottom line within break-even at seven cents per share, suggesting a decline of 100-133% year over year.
The Zacks Consensus Estimates for 2022 earnings have declined to 82 cents from $1.20 per share in the past 30 days. This reflects a 15.5% year-over-year decline.
Key Picks
Adtalem Global Education Inc. (ATGE - Free Report) : This Zacks Rank #1 company focuses on innovation in product offerings, driving growth in Becker and providing a broad range of options for Association of Certified Anti-Money Laundering Specialists or ACAMS offerings. Adtalem has multiple courses to drive revenues that comprise tapping strong demand for Medical and Healthcare professionals, capitalizing on solid demand in the mortgage market and OnCourse Learning.
This company’s earnings for fiscal 2022 are expected to rise by 9.1%.
Stride, Inc. (LRN - Free Report) : A Zacks Rank #2 company has been gaining from higher enrollment and cost-saving efforts. Persistent demand for online learning options has been benefiting Stride’s top line in recent times. Investments focused on improving user experience, enhancing teacher tools and strengthening student engagement also bode well. In addition to higher enrollments and stronger-than-expected student retention, acquisitions are expected to drive growth.
The company’s earnings for fiscal 2022 are expected to surge by 48%.
Perdoceo Education Corporation (PRDO - Free Report) : This Zacks Rank #2 company has been benefiting from an improvement in enrollment trends at both of its segments — Colorado Technical University (CTU) and American InterContinental University (AIU). Apart from higher revenues, operating efficiencies at CTU and AIU and the Trident acquisition bode well. The company’s focus on increased investments in technology and student-serving processes drives growth.
Although its earnings for 2022 are expected to decline 18.8%, the company surpassed analysts’ expectation in each of the last four quarters. PRDO has a trailing four-quarter earnings surprise of 13.1%, on average.
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American Public (APEI) Down 31% in Last 3 Months: Here's Why
American Public Education, Inc. (APEI - Free Report) tumbled 30.8% in the past year compared with the Zacks Schools industry’s 2.8% fall and S&P 500 index’s 7.3% decline. The company has been grappling with higher costs and expenses associated with acquisitions and interest and lower enrollment.
In the last reported quarter, the top and the bottom line missed the Zacks Consensus Estimate. Although revenues increased, earnings declined on a year-over-year basis due to increased costs and expenses. Total costs and expenses increased nearly 92% year over year to $149.5 million due to the inclusion of RU.
Let’s discuss the factors impacting this Zacks Rank #4 (Sell) company.
Image Source: Zacks Investment Research
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
High Costs Denting Profitability
Over the last few quarters, American Public has been experiencing increased costs, which are denting profitability. For the first quarter, total costs and expenses increased nearly 92% year over year to $149.5 million due to the inclusion of RU.
The company is also witnessing increased professional fees in the APUS segment, employee compensation costs, bad debt expenses, instructional materials costs and advertising costs in the HCN segment. Also, professional fees primarily related to the integration planning of the Rasmussen added to the woes.
Low Enrollment Poses Concern
American Public’s APUS segment has been suffering from poor Army's new tuition assistance portal experience. On Mar 8, 2021, Army’s old Tuition Assistance or TA system, GoArmyEd, was replaced with the new system, ArmyIgnitED. Due to data transfer issues, it was taken back offline and then again brought online on Jul 19.
In 2021, APUS net course registrations dropped 2.2% year over year due to the temporary suspension and disruption of the Army’s TA program (beginning Feb 2021), owing to delays in the transition from GoArmyEd to ArmyIgnitED and moderation in near-term demand for online education as the COVID-19 pandemic eased.
The trend continued in first-quarter 2022 as well. Despite enrollment growth of 1.2% revenues declined due to the timing of registrations during the quarter. Also, lower revenue per net course registrations led to the decline, given a change in mix to military registrations, which generate lower revenue per registration than non-military registrations.
Lower Projections
Due to the above-mentioned headwinds, the company expects total net course registrations at APUS to decline 2-1% year over year for the second quarter. RU’s student enrollment is likely to fall 6% from the year-ago quarter’s figure to 15,900 (due to a 2% decline in Nursing and a 10% fall in Non-Nursing). It anticipates the bottom line within break-even at seven cents per share, suggesting a decline of 100-133% year over year.
The Zacks Consensus Estimates for 2022 earnings have declined to 82 cents from $1.20 per share in the past 30 days. This reflects a 15.5% year-over-year decline.
Key Picks
Adtalem Global Education Inc. (ATGE - Free Report) : This Zacks Rank #1 company focuses on innovation in product offerings, driving growth in Becker and providing a broad range of options for Association of Certified Anti-Money Laundering Specialists or ACAMS offerings. Adtalem has multiple courses to drive revenues that comprise tapping strong demand for Medical and Healthcare professionals, capitalizing on solid demand in the mortgage market and OnCourse Learning.
This company’s earnings for fiscal 2022 are expected to rise by 9.1%.
Stride, Inc. (LRN - Free Report) : A Zacks Rank #2 company has been gaining from higher enrollment and cost-saving efforts. Persistent demand for online learning options has been benefiting Stride’s top line in recent times. Investments focused on improving user experience, enhancing teacher tools and strengthening student engagement also bode well. In addition to higher enrollments and stronger-than-expected student retention, acquisitions are expected to drive growth.
The company’s earnings for fiscal 2022 are expected to surge by 48%.
Perdoceo Education Corporation (PRDO - Free Report) : This Zacks Rank #2 company has been benefiting from an improvement in enrollment trends at both of its segments — Colorado Technical University (CTU) and American InterContinental University (AIU). Apart from higher revenues, operating efficiencies at CTU and AIU and the Trident acquisition bode well. The company’s focus on increased investments in technology and student-serving processes drives growth.
Although its earnings for 2022 are expected to decline 18.8%, the company surpassed analysts’ expectation in each of the last four quarters. PRDO has a trailing four-quarter earnings surprise of 13.1%, on average.