Goldman Sachs Comments On Strayer Education Following Recent Earnings Report

Strayer Eudcation STRA reported revenue and net income in line with Goldman's 1Q estimate but EPS was meaningfully higher on lower share count – reported EPS was $2.80 vs. its estimate of $2.72 and consensus of $2.70. New enrollment was also in line with Goldman's expectations, down 19% vs. its -20% estimate. The continuation rate was slightly better than expected and only 20bp lower than prior year. Strayer reclassified certain operating expenses. Goldman Sachs remains cautious on new enrollment for 2H2011and has lowered its new enrollment forecast for 4Q2011 to -10% from -7%. Despite the modest 4Q reduction in expected revenue, Goldman has raised its FY2011 EPS estimate principally for the lower share count given the higher-than-expected share repurchases in 1Q and the first two weeks of 2Q. Goldman Sachs maintains its Neutral rating and 12-month DCF-based PT of $137. The slight reduction in our cash flow estimates and reduction in net cash was offset by lower shares outstanding. STRA is trading higher at $123.87