For-Profit, Investors, Required, University & College - Written by on Tuesday, July 26, 2011 18:36 - 0 Comments

Capella Education’s Gloomy Guidance

Capella University

by Elbert Chu


Capella Education Company (NASDAQ: CPLA) warned investors today to expect weakness in new enrollment numbers to continue into Q3 with estimated drop around 30%.

On the Q2 earnings conference call this morning, management said Q3 revenue would be lower by 2.5-4%.

CEO J. Kevin Gilligan discussed Capella’s shift in marketing strategy from aggregators to establishing their brand for earlier traction in potential students decision cycles. They expect marketing costs to be higher in Q3 as they ramp up initial trials in TV, print and digital.

In spite of the new direction, Capella is still foundering in weak new enrollments by three pressures on their core demographic cited by Gilligan:

  1. High unemployment
  2. Low consumer confidence
  3. Government cut backs in funding

Still, Gilligan remained upbeat saying the company was convinced of their long term strategy and focus on mid-career students seeking graduate degrees will rebound in 2012. Additionally, the Minneapolis, Minnesota-based company believes they will not need to make any material changes to meet the new gainful employment rules.

The company’s shares are down nearly 30%  year to date, and CFO Steven Polacek says they have repurchased one million shares, and will continue at the same pace. With the stock closing up 1.39% to $46.76, the gloom may be baked-in already.


Financial breakdown at Reuters.

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