Strayer Beats on Higher Student Enrollment

Strayer Education beats third-quarter expectations thanks to increased student enrollment and higher tuition.
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ARLINGTON, Va. (

TheStreet

) --

Strayer Education

(STRA) - Get Report

beat third-quarter expectations thanks to increased student enrollment and higher tuition.

The for-profit education company also announced a 33%

increase to its annual dividend from $3 to $4, to be paid on a quarterly basis. The next dividend of $1 per share will be paid Dec. 10 to shareholders of record on Nov. 26.

Strayer posted net income of $23.3 million, or $1.72 per share, compared with year-earlier earnings of $16.7 million, or $1.21 per share. Analysts had been looking for earnings of $23.4 million or $1.72 per share. Revenue jumped 29% to $147.6 million, from $114.4 million, topping expectations for sales of $145.9 million.

Strayer said enrollment at its Strayer University for the 2010 fall term increased 12%. Across its campus and online system, continuing student enrollments increased 17% while new student enrollments decreased 2%.

Strayer forecast current quarter EPS in a range between $2.64 and $2.66, well below expectations for fourth-quarter EPS of $2.99. The company's full-year guidance for EPS in a range between $9.63 and $9.65 also came up short. Analysts expected earnings of $9.93 for 2010.

The post-secondary education provider said it plans to open eight new campuses next year and implement a 5% tuition increase effective January 2011.

Strayer forecast 2011 earnings of up to $11.50 per share assuming a 13% increase in annual student enrollment at Strayer University in 2011.

For-profit education sector peers such as

DeVry

(DV)

,

Capella Education

(CPLA) - Get Report

,

Apollo Group

(APOL)

and

ITT Educational Services

(ESI) - Get Report

did not have such rosy expectations for student enrollment.

DeVry warned earlier this week that it expects fewer students to enroll in its undergraduate programs at DeVry University.

>>DeVry Bids Up on Earnings Beat

Capella said earlier Tuesday that "new enrollment is anticipated to be slightly down from fourth quarter 2009, due to an increasingly challenging external market environment."

ITT said last week that new student enrollment fell in its recent quarter for the first time in several years -- by 3.9% to 26,664. Revenue per student also fell by 2.5% to $4,730.

Apollo warned a week earlier that enrollment would be down more than 40% in fiscal 2011's first and second quarters.

>>Apollo Outlook Weighs on School Stocks

Corinthian Colleges

(COCO)

said in August it expects first-quarter pro-forma new student growth of less than 2%.

The for-profit education sector has been experiencing "a hard reset," said Herb Greenberg on CNBC last week.

For-profit schools traded sharply lower over the summer when the U.S. government proposed regulations that were seen as hurting the industry's booming earnings growth. The Obama administration argues that for-profit schools like Apollo,

Everest colleges parent

Corinthian Colleges

,

Strayer Education

and a number of their peers saddle their students with debt yet leave them unequipped for the job market and a means with which to repay the hefty loans.

>>School Stocks Fall on Enrollment Outlook

Gainful employment rules are expected to be published sometime in early November.

The

S&P 1500 Education Index

, which tracks the industry, dove 34% from June through August, a retreat that began after the Obama administration announced June 16 that it would seek regulations aimed at stanching for-profit schools' high rate of student-loan defaults and curbing their aggressive marketing practices.

That was followed by a series of proposals to meet those objectives from the Department of Education, including one that would reduce schools' ability to make federal loans based on the rate of their students' loan defaults.

>>Corinthian Miss Drags on School Stocks

Worries were amplified after data showed nearly two-thirds of for-profit colleges' students were not repaying their loans. Repayment rates at for-profit schools were just 36% in fiscal 2009, according to research from the Institute for College Access and Success, a student-advocacy group. At private nonprofit schools the repayment rate was 56%, and at state colleges and universities the rate was 54%.

Under the Department of Education's proposed "gainful employment" rule, federal aid would be cut for schools where less than 45% of students are able to repay their loans. Additionally, schools would only be eligible for federal aid if student debt remains below 8% of total income or below 20% of discretionary income.

The Higher Education Act of 1965 requires that programs in need of federal aid must provide their students "gainful employment in a recognized profession."

-- Written by Miriam Marcus Reimer in New York.

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