From Strength To Strength: Perdoceo Education (PRDO) Beats Q4 Estimates With Eye On 2024 Growth

As has become common practice at this point, Perdoceo Education
PRDO
reported another set of better-than-anticipated quarterly results last night. Due to the expected 39.3% year-over-year drop in student enrollments at its American InterContinental University System (AIUS) that resulted from short-term operational changes undertaken and adjustments made to its processes around generating prospective student inquiries during 2023 in order to comply with new regulations, total Q4 revenue declined 16.0% to $147.9 million. But this still came in $1.7 million ahead of consensus as enrollments at its Colorado Technical University (CTU) were up 3.2% and student retention and engagement during the quarter were the highest they have been over the past few years across both of the company’s academic institutions. And thanks to PRDO incurring less marketing and legal costs and earning a lot more interest income on its hefty and growing cash balance, adjusted earnings fell by just 12.9% to 27 cents per share versus the much larger drop of 25.8% to 23 cents expected.

Better yet, this solid operating performance also drove the production of $11.6 million in free cash flow during the quarter, which allowed PRDO to shell out $7.2 million for its recently initiated dividend and repurchase $3.8 million worth of its shares while still increasing its already massive cash hoard slightly to $604.2 million (which translates into about $9 in net cash per share and represents more than half of its current share price).

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That’s only likely to increase given the better-than-expected forecast the company also provided for 2024. Indeed, with the high levels of student retention and engagement it experienced in the second half of 2023 expected to persist and drive substantial enrollment growth—including a double-digit rebound in enrollments at AIUS—PRDO is projecting $2.04-2.26 in earnings per share this year. While the $2.15 midpoint of the latter only implies growth of about 2% from 2023, it compares favorably to the flat earnings of $2.10 projected by analysts. And as its cash load continues to rise, I’d expect the stock to finally break out of the range it has been bound to for the past several months.