UPDATE 2-Strayer Q2 tops St view; shares down on bad debt rise
* Q2 EPS $2.00 vs year-ago $1.50
* Q2 revenue up 29 pct
* Summer 2009 total enrollments up 24 pct
* Sees Q3 EPS $1.14 to $1.16
* Shares down about 3 pct (Recasts, adds comments from conference call, analysts' comments; updates share movement)
BANGALORE, July 30 (Reuters) - Strayer Education Inc (STRA.O) posted quarterly results above analysts' expectations, but shares of the company fell nearly 3 percent on concerns about a rise in its bad debt expense.
"I think it (the stock) is primarily down because of bad debt and premium valuation," Barrington analyst Alexander Paris Jr said.
Expenses to meet bad debt rose to 4.2 percent of total revenue during the quarter compared with 2.8 percent a year ago, the company said.
A higher percentage of currently enrolled students are paying their tuition bills, but it's getting harder to collect the tuition bills owed from students who have previously dropped out of the university, the company said in a conference call with analysts.
According to the Higher Education Act, if a student drops out before completing 60 percent of a course, universities must return the portion of unused Title IV funds to the government.
The university may try to collect the amount from the student, BMO Capital's Jeffrey Silber said in a note to clients.
However, analysts are not concerned about the rise in bad debt expense.
"If people default on their mortagages, car payments, they will default on student loans too. It should not be unexpected," analyst Paris Jr said.
"There are levers management can pull to reduce bad debt. If you are willing to take a lower growth rate, you can reduce bad debt," he said.
Rival ITT Educational Services Inc (ESI.N) also reported a rise in bad debt expense this quarter and said it was a result of a rise in internal student lending. Continued...
