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Why Is American Public Education (APEI) Up 7.9% Since Last Earnings Report?

It has been about a month since the last earnings report for American Public Education (APEI). Shares have added about 7.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is American Public Education due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

American Public Q1 Earnings Beat, Improve Y/Y

American Public Education, Inc. reported impressive first-quarter 2021 results. Not only the top and bottom lines topped the Zacks Consensus Estimate but also increased on a year-over-year basis. Notably, both the metrics exceeded management’s respective guidance on the back of solid enrollment growth across the segments.

During the earnings call discussion, the company noted that the ongoing transition to ArmyIgniteED adversely affected Army enrollments after Mar 31, which will ultimately affect second-quarter results.

Angela Selden, APEI's CEO, said, "For the sixth consecutive quarter both APUS and Hondros have delivered year-over-year enrollment growth, improving APEI's operating performance significantly. We believe our enterprise transformation initiatives, continued emphasis on outreach to nursing and military communities particularly during the pandemic, and improved operating efficiencies are delivering top-line growth and solid financial performance this quarter."

Delving Deeper

American Public reported adjusted earnings of 49 cents per share, which topped the consensus estimate of 42 cents by 16.7% and increased a whopping 206.3% on a year-over-year basis.

Total revenues of $88.5 million surpassed the consensus mark of $88 million by 0.6% and grew 18.7% from the year-ago period. The upside was mainly driven by solid performance across the business.

For the quarter, total costs and expenses increased 8.3% year over year to $77.9 million. Adjusted EBITDA grew a notable 87% year over year to $15.9 million.

Segment Discussion

APEI: Revenues of $77.4 million grew 15.4% from the year-ago period. Within the APEI segment, American Public University System’s (“APUS”) student enrollment grew 11% from the comparable year-ago period to 91,500 at March-end. For the quarter, total net course registration jumped 10% from the year-ago period to 92,900. Net course registrations by new students also increased 14% from the prior-year figure to 11,500.

HCN: Segment’s revenues rose 47.7% year over year to $11.1 million owing to improved enrollments. Both total and new student enrollment at HCN increased 45% from the prior-year quarter to 2,270 and 644, respectively, marking the highest in the school’s history.

For the quarter, inter-segment elimination totaled $13 million.

Financials

At March-end, American Public had total cash and cash equivalents of $320.8 million compared with $227.7 million at 2020-end. Capital expenditure totaled $1.5 million for the first quarter compared with $1.9 million in the year-ago period.

Second-Quarter Guidance

The company expects total revenues to fall 3-5% year over year. In the year-ago period, revenues grew 16.4% year over year. It anticipates the bottom line between a loss of 4 cents and an income of 3 cents per share, indicating a significant decline from the year-ago reported earnings figure of 45 cents. Adjusted EBITDA is anticipated within $7.3-$9.2 million.

At APUS, total net course registrations are likely to decline 4-8% year over year. HCN’s new student enrollment is likely to increase 37%, while total student enrollment is expected to grow 36% from the prior year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -97.8% due to these changes.

VGM Scores

Currently, American Public Education has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise American Public Education has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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