Career Education (CECO) sells for $16.41 a share. The education specialist’s fourth quarter earnings beat the street’s estimate by a considerable margin. The news sent Career Education’s stock skyrocketing up about 30%. The stock had been trading between $11 and $14 through the first six weeks of the year. Career Education has the potential to go even higher. Here’s why.
Career Education sales spiked nearly 2% on a year-over-year basis, reaching the $145 million mark. The company’s fourth quarter adjusted earnings were 30 cents a share, representing quite the substantial increase from the mere 64 cents per share in the same period a year ago. Most analysts anticipated the company would earn 25 cents per share in the fourth quarter thanks to revenue that reached $144 million. All in all, operating income for the full year nearly doubled. Adjusted operating income arrived at the high-end of analysts’ expectations, reaching $105 million in 2018. Company income was merely $66.8 million the previous year.
Despite all of this, Career Education has had some revenue challenges in recent years. The company was widely criticized for ever-diminishing revenue streams up until this past year. Nowadays, Career Education’s sales trends are quite impressive. The company’s Colorado Technical University generated revenue of nearly $95 million this past year. The University’s revenue has remained steady on a year-over-year basis, proving Career Education really is a viable long-term business. The company’s year adjusted operating income reached $105 million in 2018. Company income was merely $66.8 million the previous year. Furthermore, Colorado Technical University’s enrollment increased by more than 2% this year. The university’s enrollment jumped 7% in the fourth quarter alone. On a yearly basis, enrollment spiked nearly 7%. The school currently teaches nearly 24,000 students. This enrollment figure is important as it is a decade-high for the university.
Career Education’s American InterContinental University enjoyed a sales hike of 6.5 percent to more than $50 million. However, this university suffered an enrollment drop of more than 6% this year. However, the decrease in enrollment was anticipated after alterations were made to the university’s academic calendar. These changes were implemented to increase enrollment for the first quarter report coming down the line. Time will tell if these alterations were worth the wait.
Knowing this, investors have to ask themselves: is this stock worthy a hefty investment?
In short, no. Career Education has had some important missteps of note. For one, the company’s culinary school, Le Cordon Bleu, failed quite miserably. At the moment, the Career Education’s success primarily hinges on two universities. If either suffers a setback or fails, investors will be in just as much trouble as the business itself. However, there is more than one silver lining of note. Career Education’s full year cash flow stemming from operations has reached a high not seen since 2012. Company executives are adamant the business is building momentum in all the important operating metrics. The company will continue to spend on tech improvements as well as enhancing student services. If all goes as planned, Career Education will boost its student retention and continue to grow in the years ahead. The company is in prime position to add even more revenue in the coming years thanks to its teach-out strategy for student education.
Perhaps most importantly, Career Education is poised for continued growth as time progresses. Enrollment growth stems from the company’s continued investment in the admissions/advising centers, student outreach initiatives and improved training/development. Demand throughout the industry is quite strong. The icing on the cake is Career Education continues to develop new academic programs. This is not a company that will rest on its laurels. In fact, Career Education even established corporate partnerships to hike student enrollment in its laggard doctorate and masters programs.
Do not be deceived by the dip in student enrollment at Career Education’s American InterContinental University. This drop is attributable to the company’s unique academic calendar. According to Career Education executives, the number of quarterly enrollment days shapes enrollment figures. Once this variability is removed, the numbers show the University actually gained students in the fourth quarter.
Career Education’s balance sheet continues to improve as the company matures. Company leaders prudently hedged their bets by offering virtual and brick-and-mortar campuses to accommodate as many learners as possible. Look for Career Education to gradually move toward the $18 range as the company continues to expand its online and offline educational offerings.
Regards,
Ethan Warrick
Editor
Wealth Authority
