Education Management Outlook: Investors Give It Failing Grade
PITTSBURGH (
) --
Education Management
(EDMC)
was the latest for-profit education provider to offered up its earnings results Wednesday.
Education Management booked growth in year-over-year fiscal first quarter profits and revenue, but forecast current quarter results below the Street's call.
|
It was mum on the topic of
newly proposed Department of Education regulations, while industry peer
Lincoln Educational Services
(LINC) - Get Report
, which reported its quarterly results earlier Wednesday, said it is operation operating on the assumption that some version of those rules will be enacted in 2011, and that it will have an impact on its profitability.
>>Lincoln Beats on Record Revenue, Profits
The
new rules cover everything from restricting incentive-based recruiting practices, the need for new job-training courses and taking action against schools which fail to advertise honestly to requiring schools to notify students of graduation and job placement rates.
Institutions will also be required to limit student enrollment to those who have high school diplomas or can readily demonstrate their readiness for university-level education.
The rules will go into effect in the middle of next year, in time for the fall 2011 semester.
>>School Stocks Tumble on GOP Win
Lincoln said student population and revenue will "decrease modestly in 2011 from 2010 levels before gradually recovering in 2012," and that "these decreases will create downward pressure on our margins over the next 18 to 24 months" as it implements actions to remain compliant with new regulations.
A number of for-profit education providers -- including
DeVry
(DV)
,
Capella Education
(CPLA) - Get Report
,
ITT Educational Services
(ESI) - Get Report
,
Apollo Group
(APOL)
and
Corinthian Colleges
(COCO)
-- have warned of declining student enrollment in recent weeks, in anticipation of the new, more restrictive regulations.
Bridgepoint Education
(BPI) - Get Report
said Tuesday it expects student enrollment will fall as much as 7% sequentially in the current quarter.
>>Corithian Misses, Bridgepoint Beats
Education Management booked quarterly revenue of $666 million, up 24.6% from year-earlier revenue of $534.4 million. The sharp increase in revenue was driven primarily by a 23.1% increase in July student enrollment, the company said.
Net income soared 131.2% to $36.4 million, or 25 cents per share, compared with year-earlier profits of $15.8 million, or 13 cents per share.
Results topped analysts' consensus call for earnings of $31.8 million, or 22 cents per share, on revenue of $662.3 million.
Total student enrollment at the start of the current quarter was 158,300 students, a 16.4% increase from a year ago. The number of students enrolled in fully online programs increased 35.7% to over 42,300 students.
Education Management said it expects second quarter of fiscal 2011 net income to be in a range between $85 million and $88 million; EBITDA, or earnings before interest, taxes, depreciation and amortization, to be in a range between $203 million and $209 million, and earnings per share in a range between 60 and 62 cents per share.
Wall Street expects current quarter net profits of $91.4 million, EBITDA of $214 million, and EPS of 63 cents per share.
Education Management shares fell 5.6% in intraday trading ahead of its earnings report, and then tumbled 1.9% afterhours on its less-than-stellar outlook.
-- Written by Miriam Marcus Reimer in New York.
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