Capella Education (CPLA) Earnings & Revenues Beat In Q2

Capella Education Company (NASDAQ:CPLA) reported adjusted earnings of 93 cents in the second quarter of 2016, which surpassed the Zacks Consensus Estimate of 88 cents by 5.68%. Adjusted earnings per share increased 3.3% year over year on the back of strong revenues.

Revenues and Enrollment in Detail

Capella’s quarterly revenues of $106.7 million beat the Zacks Consensus Estimate of $106 million by 0.7%. Revenues inched up 2% from the year-ago level, owing to an improvement in enrollment levels at Capella Education Company.

Effective second quarter 2016, Capella Education Company has started to report under two segments: Post-Secondary and Job-Ready Skills. While the Post-Secondary segment comprises Capella University and Sophia Learning, the Job-Ready Skills segment consists of Capella Learning Solutions, Hackbright Academy and DevMountain.

Post-Secondary: The segment reported revenues of $105.8 million, up 1.2% year over year, driven by positive enrollment levels recorded at Capella University. Operating margin of 20.4% increased 270 basis points (bps) year over year on the back of strong revenues.

Total active enrollment rose 2.4% year over year driven by a 2.5% increase in new enrollment and 4% improvement in early cohort persistence.

Job-Ready Skills: The segment reported revenues of $0.9 million in the second quarter of 2016, compared with $0.1 million in the second quarter of 2015. The segment reported an operating loss of $3.5 million compared to a loss of $0.5 million in the second quarter of 2015. The operating loss in second quarter 2016 includes $1.9 million in transaction costs and purchase accounting related to the acquisitions of Hackbright Academy and DevMountain.

Costs and Margins

Capella’s operating income was flat year over year at $18.1 million. Second quarter 2016 operating income includes $1.9 million of acquisition-related transaction costs and effects of purchase accounting. Operating margin decreased bps to 16.9%.

Third Quarter 2016 Guidance

Capella provided guidance for third quarter 2016. Consolidated revenues are expected to be up 4.5% to 5.5%. The company expects new enrollment to increase slightly year over year. Total enrollment is expected to increase about 2% to 3% on the back of strong persistence.

Consolidated operating margin is expected to be about 10.5% to 11.5% during the quarter.

Fiscal 2016 Outlook

Capella provided guidance for fiscal 2016. Consolidated revenues are expected to be between $424 and $428 million. Earnings per share are expected to be in the range of $3.30 to $3.40.

CAPELLA EDUCATN Price, Consensus and EPS Surprise

CAPELLA EDUCATN Price, Consensus and EPS Surprise | CAPELLA EDUCATN Quote

Zacks Rank & Key Picks

Capella currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the consumer discretionary sector include Apollo Education Group Inc (NASDAQ:APOL) , New Oriental Education & Technology Group Inc. (NYSE:EDU) and Barnes & Noble (NYSE:BKS) Education Inc (NYSE:BNED) . All the three companies hold a Zacks Rank #2 (Buy).

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