ITT Educational's profit falls 36 percent
CARMEL, Ind. (AP) — ITT Educational Services Inc. said Thursday that its third-quarter net income fell 36 percent as enrollment fell amid stricter federal regulations that hold for-profit online schools more accountable for graduation rates and job placement.
The Carmel, Ind.-based company also lowered its guidance for the year, but the profit nevertheless beat Wall Street expectations and shares of ITT rose almost 8 percent to $27.06.
For the three months ended Sept. 30, the company earned $42.9 million, or $1.83 per share. That's compared with $67.3 million, or $2.48 per share, in the same period last year.
Total revenue fell 13 percent to $314.7 million. Analysts on average expected a profit of $1.79 per share on revenue of $318.2 million.
New student enrollment fell 16 percent to 19,298, while total student enrollment fell 17 percent to 65,662. The company said its operating margin, or income after costs, fell to 22.5 percent, from 30.5 percent.
ITT now expects to earn between $8 and $8.10 per share, down from the $8 to $9 range it previously forecast.
ITT offers degrees in subjects such as computer programing and Web development through its ITT Technical Institutes and Daniel Webster Colleges. The broader for-profit education industry saw enrollment rise during the recession as unemployment rose and people sought new skills to improve their job prospects. But the industry has recently been hit by regulatory changes and criticism that the schools were leaving students saddled with huge college loans and slim job prospects.
Under new rules, colleges must meet certain performance criteria or risk losing access to federal student loans. A number of for-profit education companies have stiffened enrollment guidelines, and that has cut into enrollment and profitability.