Capella Education Co. reported a 2 percent drop in fourth-quarter profit Tuesday. Shares fell more than 11 percent, though, as executives signaled heavier spending in 2017.
The Minneapolis-based education services company said its total active enrollment was up 3.5 percent in the last three months of 2016 compared with the same period in 2015. But it signed fewer new students in the period than a year earlier.
The company earned $11.43 million, down from $11.65 million a year earlier. That amounted to 97 cents a diluted share, 2 cents more than analysts surveyed by Zack’s Investment Research expected.
Revenue rose 4.9 percent to $111.3 million, an acceleration at the end of a year when revenue grew 3.1 percent.
For the first three months of 2017, Capella forecast slightly faster revenue growth, in a range of 5 to 6 percent. But executives signaled they expected that growth to slow through the rest of the year, with a forecast for full-year revenue to rise in a range of 3 percent to 5 percent.
The company’s shares fell 11.4 percent to close at $74.15, essentially where they were before a postelection rally began for shares in Capella and other for-profit education providers.
In a call with analysts, Capella executives described several spending efforts this year that they expect will drive faster growth in 2018. The company will spend more to develop its job-ready training programs and increase marketing for nearly all of its programs during the first half of this year.
“2017 is going to be a year where we are targeting to improve our revenue growth rate while investing in building growth for 2018 and beyond,” Steve Polacek, the company’s chief financial officer, said on a conference call with analysts.
Asked about the prospect for congressional reforms that will help the for-profit education business, Chief Executive Kevin Gilligan described an appearance before a House subcommittee earlier this week.
“I found the session to be very constructive,” he said.