American Public Education enters its third-quarter report with an odd disconnect. Management raised full-year guidance for the fourth straight time last quarter and said it had never been more optimistic, yet the stock has fallen about 19% since that call, trailing the S&P 500 by roughly 17 percentage points. The quarter itself was always going to look soft on paper, by management's own design. Investors now need to decide whether that softness is the temporary dip the company described or the start of a slower story.
Wall Street expects earnings of $0.26 per share on revenue of $166.1 million. That implies revenue growth of just 1.8% and a 13.3% decline in EPS from the $0.30 earned a year ago, a sharp step down from the 5.5% revenue growth and 36.8% jump in adjusted EBITDA reported last quarter. Management guided to EPS of $0.18 to $0.29 and revenue of $164.5 million to $167.0 million, with adjusted EBITDA of $14 million to $17 million. The Street sits in the upper half of both ranges, so the bar is modestly ambitious rather than easy. Analysts were near $0.46 before the guidance arrived, which shows how far the estimate had to fall to absorb the outlook.
The reasons for the dip matter more than the dip itself. Management pointed to roughly $4 million of Military Plus revenue shifting from the third quarter into the fourth, plus nonrecurring marketing optimization costs in the back half of the year. If the military shortfall is truly timing, the company should be able to show registrations holding up and reiterate that the revenue lands in the fourth quarter. The tougher question is underlying demand. Military Plus grew only 4.7% last quarter on 2% registration growth, with active-duty Navy, Air Force and Marine students pulled away by Middle East deployments. Management called that event-driven, with Army strength as evidence. Any spread of weakness beyond those branches would challenge that framing.
Health Plus, the division that has driven the margin story, is guided to slow to about 3% enrollment growth, with campuses up around 7% after a 9% gain last quarter. The weak spot is rising cost per lead in non-core online programs, now under outside review. Results near or above that 3% mark, alongside signs that marketing spending is becoming more efficient, would support the idea that this is a fixable cost problem rather than a demand problem. The pending departure of the division's president adds a leadership question worth addressing.
The report also brings the first look at the newest catalyst. The institutional combination closed on August 4, giving the company a single accreditation and removing the enrollment growth cap placed on Rasmussen in 2021. Management promised to quantify revenue synergies on this call, including bringing Rasmussen programs to Hondros campuses. A concrete number, plus updates on the Fort Lauderdale campus, Orlando's ahead-of-plan ramp and the proposed increase in military tuition assistance rates, could reset the longer-term debate.
Sentiment has cooled noticeably, falling to barely bullish from much more upbeat readings before the last report. The stock trades near $40.57, just above its post-earnings low of $40.06 and well below its 200-day moving average near $49.70. Expectations are clearly lower than three months ago. The deciding issue is the fourth quarter: because the full-year guide was raised while the third quarter was guided down, holding the annual range intact is the clearest proof that this quarter's weakness is timing, not trend.