Why Career Education (CECO) Stock Is Plummeting Today

NEW YORK (TheStreet) -- Career Education  (CECO) plummeted Thursday after the company reported first-quarter earnings that came up short of analysts' expectations.

The company posted a net loss of 71 cents a share, far worse than the Capital IQ Consensus Estimate of a loss of 42 cents a share. Revenue declined 14.6% year over year to $243.1 million. well short of the consensus estimate of $261.92 million.

Career Education attributed the decline to the approximately 4,400 fewer total student enrollments year over year in its ongoing institutions, which exclude Transitional Schools. The Transitional Schools accounted for 4.1% of the revenue decrease. Total student enrollment fell 12% year over year to 55,700, while new student enrollment declined 6% year over year to 16,030.

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The stock was down 28.96% to $4.76 at 3:36 p.m.

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Separately, TheStreet Ratings team rates CAREER EDUCATION CORP as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate CAREER EDUCATION CORP (CECO) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Diversified Consumer Services industry and the overall market, CAREER EDUCATION CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$135.70 million or 174.95% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • CAREER EDUCATION CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CAREER EDUCATION CORP reported poor results of -$3.02 versus -$2.24 in the prior year. This year, the market expects an improvement in earnings (-$1.46 versus -$3.02).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Diversified Consumer Services industry average, but is greater than that of the S&P 500. The net income increased by 50.2% when compared to the same quarter one year prior, rising from -$61.49 million to -$30.61 million.
  • CECO, with its decline in revenue, underperformed when compared the industry average of 2.0%. Since the same quarter one year prior, revenues fell by 18.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: CECO Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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