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Shares of Strayer gained 13.9 percent after it reported
quarterly results on Wednesday, and Capella shares were up 4
percent on Wednesday, on top of a 12 percent gain after it
reported results on Tuesday.
The entire sector has struggled since a 2010 government
crackdown revealed high student debt loads, low graduation rates
and poor employability of graduates. ITT Educational Services <ESINQ.PK>
imploded last month after the government banned it from
enrolling students who receive federal aid. Corinthian Colleges
abruptly closed last year amid federal and state investigations.
However, Strayer and Capella have managed to find a way to cope
with regulatory constraints and differentiate themselves in the
highly competitive market, according to analysts.
"Within the carnage of the sector there are companies performing
well this year. For value oriented investors there's an
interesting opportunity," said Piper Jaffray analyst Peter
Appert.
Strayer reported third-quarter adjusted earnings per share of 27
cents, beating expectations of 22 cents. BMO Capital markets
analyst Jeffrey Silber attributed the beat to a 13 percent
increase in new enrollments and said this was its fastest
enrollment growth since 2010.
While Capella's new enrollments weakened, Silber raised his
earnings per share estimate for the company as its outlook for
profit margins and revenue improved.
Both Silber and Appert cited Grand Canyon Education Inc <LOPE.O>
as another company that has been doing well despite the sector's
troubles. Grand Canyon reports results on Nov. 2.
Its shares are up 4 percent year-to-date, while Strayer shares
have fallen 21.7 percent and Capella shares have risen 46.7
percent.
Shares of American Public Education Inc <APEI.O>, which reports
results on Nov. 7, were up 2.7 percent on Wednesday, adding to
an 8 percent gain for the year. DeVry Education Groupm Inc <DV.N>,
whose shares were up 1.8 percent on Wednesday, reports on Nov.
1.
"Positive results from two companies, two days in a row …
practically a record in this industry," said Piper Jaffray's
Appert. "If we see similar trends at some of the others perhaps
we’ll see a pick-up in investor interest. Too soon to call a
trend at this point."
(Reporting By Sinead Carew; Editing by Steve Orlofsky)
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