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Stock Ideas Investors Daily Edge Stock Career Education Corp. (CECO)
Stock Ideas Investors Daily Edge Stock Career Education Corp. (CECO) 
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| Stock Career Education Corp. (CECO) |
| Friday, 04 April 2008 | ||||||||
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If I could spend the rest of my life in college just learning everything there is to know, I would. Of course I can’t because I’m not filthy rich yet. But that doesn’t stop me from wanting to learn. Hell, it’s the reason I got into the financial industry. And the interesting thing is that as our economy slows, a lot of other people come around to this view. As they become more fearful about losing their jobs, they go back to school so that they can gain an edge over the competition. At first glance, it’s what made Career Education Corp (CECO) seem so attractive. And I wasn’t the only one who thought that. A reader wrote in… Thank you for your great articles. I was wondering what input you might have on Career Education Corporation, owner of proprietary colleges in the U.S. The stock is off 65% or so in the last four months but still seems sluggish and acting as if it has found a truer home at $13-$15 than when it was in the mid-$30's. A lot of changes have been made at Chicago's corporate headquarters (streamlining of payroll, creation of more strategic business units, unification initiatives for curricula at related campuses), and historically, in times of recession, school enrollments tend to increase at all schools as tightened labor markets encourage people to further or retool their education, but I'm not sure if any of that makes for a bounce-able floor for CEC's share price. Regards, Greg A. Greg, I like the education sector. I think it is a pretty safe industry. But honestly, this isn’t one of the companies I like. When I started looking at the numbers, I saw they had a 57% drop in quarterly earnings growth. So I looked into their annual reports to see what was going on. Directly from the report it says (I underlined the juicy parts)… The decline in our operating results represents a continuation of declining operating performance experienced in recent periods, which has been influenced by a number of factors, including, but not limited to,
(1) the continued Probation status of our AIU schools, which was eventually lifted in December 2007, (2) general competitive pressures for student leads and enrollments experienced by some of our schools, (3) the ED's general restrictions on our ability to open new branch campuses, which were eventually lifted in January 2007, (4) the continued negative impact of legal and regulatory matters, and (5) the related negative publicity and negative press coverage regarding us and certain of our schools. In addition, the current year operating results include expenses of approximately $20 million related to the probable settlement of certain legal matters. And this is as far as I went before realizing this company wasn’t going to ride anywhere anytime soon. Sure some of CECO’s problems got resolved last year. But they took too much of a credibility hit for me to feel comfortable with them. Plus, they haven’t shown any signs of a financial turnaround. In bad economic times, you want to look for the strongest companies that get beaten down. This company certainly isn’t one of them. And if CECO can’t get these problems of perception under control, then they could take some big hits in the future. Right now, this company is too much of a risk to ride. You should expect it to slide or at the least, underperform the rest of the market. P.S. Want to see me cover a stock? Send an e-mail to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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