Greenberg: Is Strayer the Rule, Not the Exception?
Strayer Education and other for-profit education companies are taking a big hit on Monday. On late Friday, after the market’s close, Strayer had announced worse-than-expected enrollment results.
At the heart of issue: New student enrollments fell by 20 percent in the winter term. That's biggest drop in at least 10 years. Total enrollment increase of 4 percent was also well below expectations.
To put that in perspective: Last year, total enrollments rose by 22 percent, with a 16 percent increase in new students.
As a result, Strayer gave a new range of earnings expectations based on various levels of enrollment: From $7.50 a share to original expectations of as much as $11.50 a share.
This also comes as Strayer has increased tuition by 5 percent.
On an earnings call Monday morning, Chief Executive Robert Silberman said there was no reason in particular for the drop, which is occurring as the for-profit education industry reels from new regulations, negative press and anticipations of new so-called gainful employment rules.
Silberman did say that internally, company officials have been “distracted” in recent months by the negative publicity and “government activity.”
Strayer has been a poster child for possible problems if gainful employment rules go through as planned, with certain metrics schools must meet for such things as student debt to income and student-loan delinquency rates.
Those metrics for Strayer, released by the Education Department, were surprisingly low—to the point that if the department is correct in its assessment, Strayer’s eligibility to receive future federal loans under the proposed guidelines could be impacted.
It’s unclear when the Education Department will implement those new rules.
Meanwhile, on tap and perhaps driving for-profit stocks even further one way or the other: Apollo Group's announcement of earnings after the close. A quarter ago, Apollo, which operates the University of Phoenix, led the industry's reality check by withdrawing guidance and saying that its business is likely to get worse before it get better.
That appears to be the story of Strayer Monday.