Career Education Corp.’s Earnings Triple, Sending Stock up 20 Percent

Shares of Career Education Corp. surged 20 percent Friday after the company reported a jump in fourth quarter net income late Thursday that greatly surpassed the analysts’ consensus estimate.

Career Education, headquartered in Hoffman Estates, reported net earnings that more than tripled to $31.2 million, or 35 cents per diluted share, for the fourth quarter ended Dec. 31, compared with earnings of $8.8 million, or 10 cents per diluted share, in the year-earlier period.

Analyst estimates compiled by Zacks Investment Research Inc. projected earnings per share of 21 cents for the company, 14 cents short of the actual figure for the quarter.

Total revenue declined 5.2 percent to $431.8 million in the quarter from $455.3 million in the same period a year ago.

“For the past two or three quarters they have been growing, and it seems as though that trend will continue,” said Brandon Dobell, analyst at Chicago’s William Blair and Co. LLC. “They are making good progress in their operating profit margins, enrollment, and their confidence in terms of sustainability.”

According to Dobell, student enrollment in associate degree programs and some discontinued operations had much to do with Career Education’s nearly flat revenue.

“Within the bigger university segment, there was good enrollment growth, but people took advantage of lower-priced programs like associate’s and bachelor’s in 2008, when they took the pricier bachelor’s and master’s programs last year,” Dobell said.

As of Jan. 31, student enrollment increased 1 percent to 98,000 from 97,100 on Jan. 31 a year ago, led by a 14 percent increase in online enrollment to 36,300 students. Enrollment in the online art and design program on Jan. 31 was 900, more than double the 400 students in the program a year ago, while culinary student enrollment declined 12 percent to 9,600 from 10,900 a year ago.

Jeff Leshea, Career Education’s senior vice president of corporate communications, said revenues were also impacted by the tightening of the student lending market as the credit crisis took hold in 2008.

“We’re addressing those issues aggressively right now and expecting improvements this year,” Leshea said. ”We will continue to expand our student lending, focusing on those students with the greatest potential to complete those programs and fulfill their loan obligations.”

Analysts say Career Education and its competitors in for-profit education are gaining in the current recession as job worries push more people toward higher education. Apollo Group Inc. and ITT Educational Services Inc. have already posted significant gains in enrollment, revenue and income in their most recent quarterly filings.

For the full year, Career Education earned $60.1 million, or 67 cents per diluted share, compared with $59.6 million, or 63 cents per diluted share in 2007. Annual revenue fell 2.4 percent to $1.71 billion from $1.75 billion.

Shares of Career Education closed Friday at $23.62, up $3.96.  (Medill Reports Chicago)

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