Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of for-profit educator Strayer Education (NASDAQ:STRA) were getting sent to the principal's office today, falling as much as 17%, after disappointing guidance in its earnings report.
So what: Nearly every important financial metric was down for Strayer as revenue fell 9%, to $124.3 million, and earnings per share dropped 70%, to $0.36. Those results actually beat estimates slightly as the company managed to increase new student registration by 4% in the fall term, even though total enrollments fell 5%. The real issue came with the company's decision to suspend its dividend in 2013, and its lowered forecast. Strayer plans to use the former dividend cash flow to build new campuses, and says it expects to earn just $1.43-$1.45 per share in the fourth quarter. Analysts had projected $1.59. Also, 2013 is expected to be slightly lower than 2012.
Now what: The for-profit education sector has been falling across the board as the Department of Education has stepped up oversight, imposing tighter regulations on graduation rates, loan default rates, and marketing expenditures. Enrollment, a key industry metric, has been falling of late. Strayer may be able to increase the number of students by adding new campuses but, as long as enrollments are falling at mature campuses, which saw a 10% drop this quarter, I'd stay away.
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Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Strayer Education. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.