Bloomberg News

Apollo Group Gains the Most in a Year on Profit Forecast

June 26, 2012

Apollo Group Inc. (APOL:US), the largest U.S. for-profit college chain, gained the most in a year after reporting quarterly earnings and revenue that topped analysts’ estimates and raising its full-year profit forecast.

Profit for the year excluding one-time items will be as much as $740 million, up from a prior (APOL:US) projection of as much as $725 million, the owner of the University of Phoenix said in a statement yesterday after the close of regular trading.

Apollo, confronting student reluctance to take on debt amid high unemployment and government investigations of for-profit colleges’ marketing practices, reined in costs during the quarter, said Peter Appert, an analyst at Piper Jaffray & Co. in San Francisco.

“It’s a very challenging environment,” Appert, who has a neutral rating on the stock, said in a telephone interview. “The business dynamics facing for-profit education have clearly changed in the last couple of years.”

Apollo, based in Phoenix, climbed 10 percent at the close in New York, the most since (APOL:US) June 2011. The shares have declined 34 percent this year.

In the three months ended May 31 -- Apollo’s fiscal third quarter -- net income fell to $134.4 million, or $1.13 a share, from $212.4 million, or $1.51, a year earlier, Apollo said. Profit excluding some items was $1.20 a share, exceeding the 97- cent average of estimates (APOL:US) compiled by Bloomberg.

Enrollment Falls

Costs were lower than forecast in the quarter, and the company bought back shares, Appert said in an e-mail. Apollo said that marketing expenses dropped $2.2 million to $158.9 million.

As of the end of May, a total of 346,300 students were enrolled in Apollo degree programs, down 13 percent from a year earlier. New students signing up for classes decreased 8 percent. In March, the company said new student enrollment could “break into negative double digits” in the third quarter.

Investors are looking for signs that enrollment is stabilizing, following a decline that began at the end of 2010, Appert said.

In the quarter, sales fell 8.5 percent, to $1.13 billion, compared with the $1.12 billion estimate of analysts. Yesterday, Apollo reiterated that revenue for the year is expected to be as much as $4.3 billion.

To contact the reporter on this story: John Hechinger in Boston at jhechinger@bloomberg.net

To contact the editor responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net


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Companies Mentioned

  • APOL
    (Apollo Education Group Inc)
    • $27.8 USD
    • -0.13
    • -0.47%
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