Corinthian Colleges Inc. (COCO), a for-profit education company, on Tuesday reported a profit for the fourth quarter, compared to a loss in the same period last year. The results for the latest quarter were aided by a 24% increase in student population amid high unemployment, in addition to higher operating margins. Looking ahead, the company forecast earnings and revenue for the first quarter as well as fiscal year 2010 above analysts' consensus estimates. Shares of the company are up more than 13% in the regular trading session.
Education companies have enjoyed a strong run in the past several quarters as demand for education has increased amid a weak economy. People without employment are returning to school in the hope that a better degree might improve their chances of getting a job, while people who are employed want to make themselves more valuable at their existing jobs.
Fourth-Quarter Results
The Santa Ana, California-based company's net income for the fourth quarter was $23.19 million, or $0.26 per share, compared to net loss of $0.62 million, or $0.01 per share, in the the same quarter previous year. Earlier, the company had forecast earnings for the quarter in a range of $0.23-$0.25 per share.
The results for the latest quarter include impairment and severance charge of $4.4 million. Approximately $2.5 million of the amount is related to an additional reserve taken on student loan receivables that the company had expected to receive from the Title IV program. These receivables are associated with the two branch campuses of the Atlanta, Georgia campus, that was closed in the year-ago quarter. Severance charges of $1.9 million for the latest quarter primarily related to the restructuring of the company's WyoTech operations and other personnel changes.
Income from continuing operations for the quarter rose to $24.66 million, or $0.28 per share, from $4.76 million, or $0.06 per share, in the prior-year quarter. Excluding impairment and severance charges, earnings per share from continuing operations for the latest quarter were $0.31. On average, 13 analysts polled by Thomson Reuters expected the company to report earnings for the quarter of $0.24 per share. Analysts' estimates typically exclude special items. Net revenues for the quarter totaled $353.51 million, up 29% from $274.03 million in the same period last year. The company had forecast revenues for the quarter in a range of $341 million-$346 million. Analysts had a consensus revenue estimate for the quarter of $342.86 million.
The company's total student population as at June 30, 2009 was 86,088, up 24.4% from 69,211 a year ago. Total student starts for the quarter increased 26.8% to 29,188. The company had projected student start growth of 16%-18% for the quarter. The company noted that it successfully increased its student population for three consecutive years. Additionally, the recession helped increase the growth momentum.
Peter Waller, chief executive officer of Corinthian Colleges, said, "The higher student population has resulted in improved leverage of facility and other fixed costs. Increased advertising effectiveness and lower media costs have improved efficiencies in marketing and admissions. Given all of these factors, our operating margin and cash flow increased substantially in fiscal 2009, and we expect continued improvement in the current fiscal year."
Peer Performance
In mid-August, DeVry, Inc. (DV) reported a 50% surge in profit for the fourth quarter from last year, boosted primarily by higher students enrollment with revenues climbing 43%. DeVry's net income for the quarter rose to $37.03 million, or $0.51 per share, from $24.57 million, or $0.34 per share, in the same period last year. Revenues for the quarter surged to $396.24 million from $276.81 million in the year-ago period.
Other Metrics
Corinthian's operating expenses for the quarter increased to $315.49 million from $270.05 million in the prior-year quarter. Educational service expenses rose to $197.84 million from $167.35 million, but decreased as a percentage of revenue to 56% from 61.1% a year ago, mainly due to a higher student population and the resulting leverage of compensation, facilities and other fixed expenses.
General and administrative costs increased to $38.67 million from $31.74 million a year ago, but decreased as a percentage of revenue to 10.9% from 11.6% in the year-ago period.
Operating income for the quarter rose to $38.02 million from $3.98 million in the same period last year and includes the impairment and severance charge of $4.4 million. Operating margin grew to 10.8% from 1.5% in the same period last year.
Fiscal Year 2009 Results
Corinthian Colleges' net income for the year was $68.76 million, or $0.79 per share, up from $21.27 million, or $0.25 per share, last year. The company had forecast earnings for the year in a range of $0.77-$0.79 per share.
Income from continuing operations more than doubled to $71.13 million, or $0.81 per share, from $32.87 million, or $0.39 per share, in the prior year. Analysts expected the company to earn $0.78 per share for the year.
Net revenue for the year rose 22.4% to $1.31 billion from $1.07 billion in the prior year, and was higher than the company's forecast for revenues in a range of $1.295 billion-$1.30 billion. Analysts had a consensus revenue estimate for the year of $1.30 billion.
Outlook For the first quarter of fiscal year 2010, Corinthian Colleges forecasts earnings per share in a range of $0.26-$0.29 and revenue in a range of $375 million-$385 million. Analysts currently expect the company to report earnings of $0.17 per share for the quarter on revenues of $348.77 million.
The company projects student start growth of 15%-17% for the quarter compared with the year-ago period.
For fiscal year 2010, the company forecasts earnings per share in a range of $1.30-$1.36 and revenue in a range of $1.58 billion-$1.60 billion. Analysts expect the company to earn $1.14 per share, on revenues of $1.51 billion.
The company expects student start growth of approximately 10%-12% compared with the prior year.
Waller said, "In fiscal 2010 we expect our student population growth to be derived from several sources, including continued implementation of new programs, online enrollment, facility expansions, new branch campuses, and high school enrollment. In addition, we expect continued high unemployment to contribute to overall growth."
Corinthian Colleges said it will continue to make substantial investments in career placement and student loan repayment to help graduates achieve career goals as well as meet financial obligations in a difficult economy.
Stock Quotes
In Tuesday's regular trading session, COCO is trading at $19.67, up $2.33 or 13.44% on a volume of 1.83 million shares. In the past 52 weeks, the stock has been trading in a range of $11.11-$21.73.
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