Strayer Education (STRA) - Bear of the Day

Strayer Education (STRA) reported a 20% fall in new student enrollment for the winter 2011 term. The company now projects that if annual enrollment drops 5%, its revenue may remain flat or fall 1% and fiscal 2011 earnings may lie between $7.50 and $7.70 per share.

This is in sharp contrast to what management had predicted previously. Earlier, the company had forecast a rise in enrollment by 13%, revenue between 17% and 18% and earnings in the range of $11.30 to $11.50 per share. Following this, a negative sentiment is palpable among the analysts and we are witnessing a fall in the Zacks Consensus Estimates.

The current potential risk looming over the education sector is the regulation proposed by the Department of Education creating an uncertainty over student enrollment trends. Consequently, we downgraded our recommendation on the stock to Underperform.
 
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