Core Insights - Three stocks in the consumer discretionary sector are showing signs of being overbought, which may concern momentum-focused investors [1][2] Company Summaries - **American Public Education, Inc. (NASDAQ: APEI)**: - Analyst Luke Horton from Northland Capital Markets maintained an Outperform rating and raised the price target from $38 to $46 - The stock gained approximately 24% over the past month, reaching a 52-week high of $38.32 - Current RSI value is 77.8, indicating overbought conditions - Recent price action shows shares gained 1.9% to close at $38.05 [7] - **Grand Canyon Education Inc (NASDAQ: LOPE)**: - Reported better-than-expected second-quarter financial results on August 6 and raised FY25 guidance above estimates - The stock has increased around 24% over the past six months, with a 52-week high of $214.58 - Current RSI value is 73.4, also indicating overbought conditions - Recent price action shows shares gained 1.5% to close at $214.30 [8] - **ODP Corp (NASDAQ: ODP)**: - Announced a definitive agreement to be acquired by an affiliate of Atlas Holdings on September 22 - The stock gained approximately 39% over the past month, reaching a 52-week high of $32.20 - Current RSI value is 74.7, indicating overbought conditions - Recent price action shows shares gained 0.6% to close at $27.97 [8]

Core Viewpoint - Grand Canyon Education (LOPE) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook on its earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in earnings estimates, which are a strong predictor of near-term stock price movements [2][4]. - Rising earnings estimates for Grand Canyon Education suggest an improvement in the company's underlying business, likely leading to an increase in stock price [5][10]. Zacks Rank System - The Zacks Rank stock-rating system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - Only the top 5% of Zacks-covered stocks receive a "Strong Buy" rating, indicating superior earnings estimate revisions [9][10]. Earnings Estimate Revisions for Grand Canyon Education - For the fiscal year ending December 2025, Grand Canyon Education is expected to earn $9.07 per share, unchanged from the previous year [8]. - Over the past three months, the Zacks Consensus Estimate for Grand Canyon Education has increased by 3.7% [8].

Economic Overview - Wall Street resumed its rally following a 25 basis points rate cut by the Federal Reserve, with the Dow and Nasdaq reaching record highs, indicating regained investor confidence [1][3] - The Federal Reserve raised its GDP forecast for the year, reflecting a positive sentiment in the economy as inflation has eased substantially [1][6] Rate Cuts and Economic Impact - The Federal Reserve's recent rate cut to a range of 4-4.25% is aimed at addressing concerns over a struggling labor market and a slowing economy, with expectations of two more rate cuts this year [3][5][9] - Lower borrowing costs are anticipated to benefit the broader economy, particularly in consumer discretionary sectors [6][9] Consumer Discretionary Stocks - Boyd Gaming Corporation (BYD) has an expected earnings growth rate of 5.2%, with a 4.9% improvement in the Zacks Consensus Estimate over the last 60 days [7] - Norwegian Cruise Line Holdings Ltd. (NCLH) is projected to have a 13.7% earnings growth rate, with a 3% increase in the Zacks Consensus Estimate [8] - Ralph Lauren Corporation (RL) shows a strong expected earnings growth rate of 19.8%, with an 8.4% improvement in the Zacks Consensus Estimate [10] - Hasbro, Inc. (HAS) has an expected earnings growth rate of 21.5%, with a notable 14.6% increase in the Zacks Consensus Estimate [11] - Grand Canyon Education, Inc. (LOPE) is expected to see a 12.8% earnings growth rate, with a 3.7% improvement in the Zacks Consensus Estimate [12][13]

Company Overview - Grand Canyon Education, Inc. (NASDAQ:LOPE) is an education services company based in Phoenix, Arizona, incorporated in 1949, offering technology services, academic services, counseling services, and back-office services [4]. Investment Potential - Grand Canyon Education, Inc. is considered one of the best education stocks to buy currently, with Evergreen Capital Management LLC acquiring a new stake of 1,830 shares valued at approximately $317,000 [1]. - The company has raised its guidance for FY 2025 and continues to outperform Wall Street's estimates, with management anticipating new start growth in the mid- to high single digits for the second half of the year due to an increase in students preferring online college [2]. - The asset-light model of Grand Canyon Education is noteworthy, as the company engages in aggressive buybacks to enhance EPS and shareholder returns, achieving a return of 151.95% over three years compared to the S&P 500's 65.16% [3].

Core Insights - The Zacks Schools industry is experiencing a rebound driven by increased demand for career-focused programs in healthcare, skilled trades, cybersecurity, and IT, supported by a labor market that values job-ready skills and government initiatives promoting non-degree pathways [1][2] - Digital innovation is a key differentiator, with institutions investing in adaptive learning tools and scalable online platforms to enhance engagement and support flexible learning for working adults [1][8] - The sector is undergoing consolidation as larger players acquire smaller institutions to broaden offerings and improve scale, with recent legislative changes like "Workforce Pell" expanding market opportunities for accredited programs [6][12] Industry Overview - The Zacks Schools industry includes for-profit education companies offering undergraduate, graduate, and specialized programs in various fields such as finance, healthcare, and technology [3] - The industry is focused on providing career-oriented programs that align with labor market needs, particularly in high-demand areas like nursing and cybersecurity [3][5] Trends Influencing Growth - There is a rising demand for workforce-oriented programs, particularly among adult learners and career switchers, as the labor market increasingly values job-ready skills over traditional degrees [4] - The healthcare sector is facing a significant shortage of skilled professionals, prompting educational institutions to design rigorous programs that meet workforce needs [5] - Digital transformation is driving interest in IT boot camps and tech-aligned certifications, where for-profit providers have established a scalable presence [4] Financial Performance and Market Position - The Zacks Schools industry has lagged the broader Zacks Consumer Discretionary sector but has outperformed the S&P 500 Composite over the past year, with a collective gain of 20.6% [16] - The industry's forward 12-month price-to-earnings ratio is currently at 15.32X, lower than the S&P 500's 22.76X, indicating potential value opportunities [19] Company Highlights - Grand Canyon Education has seen a 10% increase in total online enrollment and a 42.1% stock surge over the past year, with earnings for 2025 expected to grow by 12.8% [25] - Laureate Education's stock has rallied 76.6% over the past year, with a projected earnings growth of 28.2% for 2025 [28] - Stride has experienced a 107.8% stock increase, with fiscal 2026 earnings expected to grow by 5.2% [32] - Lincoln Educational Services has surged 59.5% in stock price, with a projected earnings growth of 19.6% for 2025 [34] - Perdoceo Education's stock has risen 44.7%, with earnings for 2025 expected to grow by 10% [39]

Company Performance - Grand Canyon Education (LOPE) shares have increased by 19.7% over the past month and reached a new 52-week high of $203.18 [1] - The stock has gained 23.9% since the beginning of the year, outperforming the Zacks Consumer Discretionary sector's 9.6% and the Zacks Schools industry's 6% [1] Earnings and Revenue Expectations - The company has consistently beaten earnings estimates, reporting EPS of $1.53 against a consensus estimate of $1.37 in its last earnings report [2] - For the current fiscal year, Grand Canyon Education is expected to post earnings of $9.07 per share on revenues of $1.1 billion, reflecting a 12.81% change in EPS and a 6.85% change in revenues [3] - For the next fiscal year, earnings are projected to be $10.09 per share on revenues of $1.17 billion, indicating year-over-year changes of 11.25% and 6%, respectively [3] Valuation Metrics - The stock currently trades at 22.4 times the current fiscal year EPS estimates, which is a premium compared to the peer industry average of 15.2 times [7] - On a trailing cash flow basis, the stock trades at 21.8 times versus the peer group's average of 12 times, with a PEG ratio of 1.49 [7] Zacks Rank and Style Scores - Grand Canyon Education holds a Zacks Rank of 1 (Strong Buy) due to favorable earnings estimate revisions from analysts [8] - The company has a Value Score of D, a Growth Score of A, and a Momentum Score of D, resulting in a combined VGM Score of B [6] Industry Comparison - The Schools industry is performing well, with Grand Canyon Education and its peer Stride, Inc. (LRN) both showing strong fundamentals [10] - Stride, Inc. has a Zacks Rank of 1 (Strong Buy) and is expected to post earnings of $8.52 per share on revenues of $2.68 billion for the current fiscal year [11]

Core Insights - Grand Canyon Education, Inc. (NASDAQ: LOPE) has been performing well since its separation from GCU in 2019, indicating a positive trend for the asset-light education services sector [1] Company Summary - The company has shown promising results in a short period, suggesting effective operational strategies and market positioning [1]

Core Viewpoint - Grand Canyon Education (LOPE) has received an upgrade to a Zacks Rank 1 (Strong Buy), indicating a positive outlook based on rising earnings estimates, which significantly influence stock prices [1][4][6]. Earnings Estimates and Stock Ratings - The Zacks rating system is primarily driven by changes in a company's earnings picture, with the Zacks Consensus Estimate reflecting EPS estimates from sell-side analysts [2][3]. - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [8][10]. Recent Performance of Grand Canyon Education - For the fiscal year ending December 2025, Grand Canyon Education is expected to earn $9.07 per share, which remains unchanged from the previous year, but the Zacks Consensus Estimate has increased by 3.7% over the past three months [9][11]. - The upgrade to Zacks Rank 1 places Grand Canyon Education in the top 5% of Zacks-covered stocks, suggesting potential for higher stock movement in the near term [11].

Financial Data and Key Metrics Changes - Service revenue for Q2 2025 was $247.5 million, an increase of $20 million or 8.8% compared to $227.5 million in Q2 2024 [24] - Operating income for Q2 2025 was $51.8 million with an operating margin of 20.9%, compared to $42.7 million and 18.8% in Q2 2024 [25] - Net income increased by 19.1% to $41.5 million in Q2 2025 from $34.9 million in Q2 2024 [25] Business Line Data and Key Metrics Changes - Online enrollment growth was 10.1%, with hybrid growth (excluding closed sites) at 15.4% [5][11] - Ground campus traditional student enrollments were down slightly year over year, but summer ground enrollment increased by 16% [7][8] - Hybrid campus enrollment increased by 14% year over year, with a 15.4% increase when excluding closed sites [11] Market Data and Key Metrics Changes - The number of high school graduates choosing the four or five-year baccalaureate path continues to decline, while interest in shorter certificate or trade programs is increasing [10] - There is a growing trend of students opting for fully online college programs, benefiting the company's online offerings [10] Company Strategy and Development Direction - The company plans to continue expanding its program offerings, including new nursing and occupational therapy programs [15][18] - The focus remains on maintaining competitive pricing and increasing retention levels to drive enrollment growth [6][8] - The company aims to accurately reflect the flexibility it provides to students across different age groups, targeting both traditional and non-traditional students [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about maintaining momentum in enrollment growth despite tougher comparisons in the second half of the year [7][32] - The regulatory environment is expected to have little to no impact on the company's partner programs, with a focus on workforce development [22][23] - The company anticipates continued growth in online and hybrid enrollments, with expectations for new enrollments in the mid to high single digits [32] Other Important Information - The company repurchased 259,271 shares at a cost of approximately $47.4 million, with $156.9 million remaining under the share repurchase authorization [28][29] - The effective tax rate for 2025 was 24.5%, down from 25.5% in 2024, primarily due to changes in state income taxes [27][28] Q&A Session Summary Question: What drove the accelerating enrollment growth in the quarter? - Management highlighted growth in teacher education and nursing programs, as well as an increase in students opting for online education [39][40] Question: What are the expectations regarding regulatory changes and competitive responses? - Management noted that while there have been competitive offers for traditional students, they have not seen the same level of aggressive offers as in previous years, which supports their enrollment growth [49][51] Question: What are the potential upside drivers for enrollment in the second half? - The company aims to exceed internal goals for new enrollments, which could provide upside potential despite tough comparisons [54]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Grand Canyon Education, Inc. for the period ended June 30, 2025, providing a quantitative overview of the company's financial performance and position [Consolidated Income Statements](index=4&type=section&id=Consolidated%20Income%20Statements) Service revenue grew to $247.5 million for the three months ended June 30, 2025, an 8.8% increase year-over-year, driven by higher partner enrollments, with net income rising 19.1% to $41.5 million Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Service Revenue** | $247,499 | $227,463 | +8.8% | $536,809 | $502,138 | +6.9% | | **Operating Income** | $51,789 | $42,719 | +21.2% | $139,812 | $127,197 | +9.9% | | **Net Income** | $41,546 | $34,878 | +19.1% | $113,164 | $102,888 | +10.0% | | **Diluted EPS** | $1.48 | $1.19 | +24.4% | $4.00 | $3.48 | +14.9% | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets stood at $1.021 billion, with cash and cash equivalents decreasing to $192.3 million, offset by a new investment balance of $181.6 million Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $192,278 | $324,623 | | **Investments** | $181,621 | $0 | | **Total current assets** | $422,481 | $419,976 | | **Total assets** | $1,021,007 | $1,018,425 | | **Total current liabilities** | $118,990 | $110,966 | | **Total liabilities** | $243,031 | $234,572 | | **Total stockholders' equity** | $777,976 | $783,853 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash from operating activities was $191.6 million, while investing activities used $198.7 million and financing activities used $125.2 million, resulting in a net decrease in cash of $132.3 million Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $191,639 | $183,526 | | **Net cash used in investing activities** | $(198,748) | $(19,989) | | **Net cash used in financing activities** | $(125,236) | $(68,695) | | **Net (decrease) increase in cash** | $(132,345) | $94,842 | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies and provide further information on financial statement items, including its business model, revenue recognition, investments, leases, legal contingencies, and share repurchase program - GCE provides education services to **20 university partners**, with its most significant partner being Grand Canyon University (GCU)[23](index=23&type=chunk)[24](index=24&type=chunk) - Revenue is generated through services agreements with university partners, where GCE receives a percentage of the partner's tuition and fee revenue, recognized over time as services are delivered[45](index=45&type=chunk)[46](index=46&type=chunk) - GCU accounted for **89.4% of total service revenue** for the six months ended June 30, 2025, indicating a significant concentration of credit risk[59](index=59&type=chunk) - The company is involved in several legal proceedings, including a False Claims Act lawsuit and matters related to GCU graduate program disclosures, for which it cannot reasonably estimate a range of loss and has not accrued any liability[85](index=85&type=chunk)[89](index=89&type=chunk)[91](index=91&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results for the three and six months ended June 30, 2025, highlighting revenue growth driven by increased partner enrollments, improved operating margins, liquidity, capital resources, and the ongoing share repurchase program [Results of Operations](index=37&type=section&id=Results%20of%20Operations) For Q2 2025, revenue increased 8.8% to $247.5 million, driven by a 10.3% rise in partner enrollments, with all expense categories decreasing as a percentage of revenue, leading to a 19.1% increase in net income to $41.5 million Partner Enrollment Growth | Metric | June 30, 2025 | June 30, 2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Total Partner Enrollments** | 117,283 | 106,307 | +10.3% | | **GCU Enrollments** | 113,435 | - | +10.5% | | **Off-campus Site Enrollments** | 4,990 | - | +14.0% | - For Q2 2025, revenue growth of **8.8%** was primarily driven by the increase in partner enrollments, while revenue per student decreased slightly due to contract modifications and student mix shifts[115](index=115&type=chunk) - Operating expenses as a percentage of revenue decreased in Q2 2025 compared to Q2 2024 across all categories, indicating improved operational efficiency and leverage[114](index=114&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity remains strong, with cash, cash equivalents, and investments totaling $373.9 million at June 30, 2025, with major uses of cash including investments and share repurchases Key Liquidity and Capital Metrics (Six Months Ended June 30, 2025) | Metric | Amount (in thousands) | | :--- | :--- | | **Cash provided by operating activities** | $191,639 | | **Capital expenditures** | $(17,561) | | **Net purchases of investments** | $(180,659) | | **Repurchase of common shares** | $(125,236) | | **Cash, cash equivalents and investments (End of Period)** | $373,899 | - The company repurchased **654,697 shares** for **$115.7 million** in the first six months of 2025[99](index=99&type=chunk)[153](index=153&type=chunk)[155](index=155&type=chunk) - As of June 30, 2025, **$183.9 million** remained available under the share repurchase authorization[99](index=99&type=chunk)[153](index=153&type=chunk)[155](index=155&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk associated with its investment portfolio, though management believes a 10% change in interest rates would not have a material impact on financial results - The company invests excess cash in money market instruments, corporate bonds, commercial paper, and other securities, exposing it to interest rate risk[157](index=157&type=chunk)[158](index=158&type=chunk) - Management believes a hypothetical **10% change in interest rates** would not materially impact the company's financial results[158](index=158&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the period[159](index=159&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[161](index=161&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 8 of the consolidated financial statements for information regarding material pending legal proceedings, including a False Claims Act matter and cases related to GCU graduate program disclosures - Information on material legal proceedings is incorporated by reference from Note 8 – Commitments and Contingencies in the financial statements[162](index=162&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - There were no material changes to the risk factors disclosed in the 2024 Form 10-K[163](index=163&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities and provided details on its share repurchase activity for the second quarter of 2025, with $183.9 million remaining available under the current authorization Share Repurchases in Q2 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2025 | 113,162 | $172.33 | | May 2025 | 71,417 | $193.20 | | June 2025 | 74,692 | $188.52 | | **Total Q2** | **259,271** | **$182.74** | - As of June 30, 2025, **$183.9 million** remained available for future repurchases under the program authorized until March 1, 2026[165](index=165&type=chunk)[166](index=166&type=chunk) [Item 3. Defaults Upon Senior Securities](index=31&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None reported - The company reported no defaults upon senior securities[168](index=168&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - The company reported no mine safety disclosures[169](index=169&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) The company reported that no director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the three months ended June 30, 2025[170](index=170&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements formatted in Inline XBRL - Exhibits filed include Sarbanes-Oxley Act certifications (31.1, 31.2, 32.1, 32.2) and financial data in Inline XBRL format (101, 104)[171](index=171&type=chunk)[172](index=172&type=chunk)