Why Strayer Shares Plummeted
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 were getting sent to the back of the class today, falling as much as 15%, after an underwhelming quarterly report.
So what: Strayer actually beat earnings per share estimates by $0.03, with a $1.47 per-share profit, but missed on the all-important top line. For-profit schools have come under increasing pressure from the Obama Administration for saddling students with debt, and enrollments have been declining across the board. Revenues in the quarter dropped 8.9%, to $141.9 million, and new and continuing enrollments both fell 5%. Even worse, first-quarter guidance was well below expectations. Management projected earnings of $1.45-$1.47 per share against expectations of $1.71.
Now what: Strayer's report seems to be further evidence that investors ought to stay away from the education sector. We've seen peers like ITT Educational Services bottom out, but most of the industry seems to be adjusting to tighter oversight and the realization by students that these schools aren't worth the debt they're committing themselves to, as the schools often spend more on marketing than educating. COO Karl McDonnell will take over as CEO on May 3, after serving as COO for seven years. Perhaps the leadership change can reinvigorate the struggling school.
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The article Why Strayer Shares Plummeted originally appeared on Fool.com.Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.
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