Capella Outlook Weighs On Education Shares (CPLA, LOPE, APEI, DV, APOL, COCO, EDMC, STRA, CECO)
It’s been a volatile year for the for-profit education sector, as traders mull an uncertain regulatory outlook. On Tuesday, select stocks pulled back after Capella Education (CPLA) disappointed with its fourth-quarter outlook. In Q3, the company’s net income rose to $13.5 million, or 80 cents per share, from $9.8 million, or 57 cents per share, a year ago. Revenue rose by 26% year-over-year to $105 million. The EPS was 2 cents ahead of analyst expectations, and revenue was roughly in line with the consensus. The firm is expecting between $1.06 and $1.12 in fourth-quarter EPS on between $113 and $115 million in revenue. Analysts had been looking for $1.18 in EPS on $119 million in revenue. The firm also forecast fourth-quarter enrollment growth of 16% to 17%, which is below analyst expectations, according to Bloomberg.
As a whole, the Education Stocks Index is down by -2% today, and is now lagging the S&P 500 by -6% over the last month. Capella is leading today’s slide with a -13% drop, followed by Grand Canyon Education (LOPE), American Public Education (APEI), and DeVry (DV).
Earlier this month, education stocks got slammed after Apollo Group (APOL) withdrew its 2011 guidance. The University of Phoenix parent is a one-month laggard, and is now trading at more than -50% from its 52-week high. Elsewhere in the sector, Corinthian Colleges (COCO), Education Management (EDMC), Strayer Education (STRA), and Career Education (CECO) have also seen their share values cut in half or more since their one-year peaks.
It will be interesting to see if another wave of buying follows the recent pressure on education stocks, or if the bears — headed by Frontpoint Partners manager Steve Eisman — are on the mark with their negative outlook. Bargain hunters stepped in to drive up education stocks in September, but more firms have since offered weaker than expected guidance, or addressed the potential impact of reduced federal funding.
Investors can track the Education Stocks Index for performance trends and a suite of other metrics at tickerspy.com.
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