American Public Education Beats - Analyst Blog - APEI (NASDAQ:APEI)

American Public Education Inc. (APEI), an online provider of higher education to the military and public service communities, recently delivered second-quarter 2010 results that topped the Zacks Consensus Estimate. The quarterly earnings of 37 cents a share surpassed the Zacks Consensus Estimate of 33 cents, and soared 32% from 28 cents posted in the prior-year quarter.

Net income for the quarter came in at $7 million, up 32% from the prior-year quarter. However, the stock dipped $12.08 or 28.3% to $30.59 in after-market trading as the for-profit education institute pointed that it is witnessing a drop in enrollments of military students, and, as a result, is rolling back its fiscal 2010 guidance of 35% to 38% rise in net course registrations and a 36% to 39% jump in both revenue and net income.

American Public Education fears that the increase in military operations in the U.S., and the deployment of military personnel in remote areas with limited accessibility to the Internet, may have resulted in the fall in enrollments. The company also hinted that in order to offset the slowing pace of military enrollments, it will now focus more on civilian students.

Total revenues of $46.3 million remained in line with the Zacks Consensus Estimate and surged 30% from the prior-year quarter.

Net course registrations from new students rose 24% to approximately 13,900. Net course registrations from civilian students climbed 53%, reflecting a 59% increase in net course registrations of new civilian students. As of June 30, 2010, about 72,300 students were enrolled in the system, an increase of 35%.

Operating income climbed 34% to $11.7 million, whereas operating margin expanded to 25.3% from 24.7% in the same-quarter last year.

American Public Education ended the quarter with cash and cash equivalents of $86.2 million and without any long-term debt. For the six-month period, capital expenditures were $8.5 million and cash from operations was $18.2 million.

The company’s board has authorized a share repurchase program of $20 million, with a cap on purchase limit, so that the buyback may not result in the company having less than 18,000,000 shares. At the end of second-quarter 2010, approximately 462,044 shares were available for repurchase.

Management for now provided guidance only for third-quarter 2010. American Public Education projected net course registrations to rise between 20% and 22%, revenue to climb between 29% and 31%, and net income to jump between 5% and 10% over the year-earlier quarter.

Currently, we prefer to be Neutral on American Public Education. Moreover, our Zacks #3 Rank, which translates into a short-term ‘Hold’ rating, correlates with our long-term recommendation.

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