Apollo Group Inc., the biggest education company by enrollment and operator of the University of Phoenix, withdrew its forecast for fiscal 2011 citing regulatory scrutiny and declining numbers of new students. The shares fell about 12 percent in extended trading.
Apollo expects a drop in new enrollment for its degree programs to accelerate in the first quarter of 2011, resulting in “significant year-over-year decline,” the Phoenix-based company said today in a statement.
Enrollment growth at Apollo slowed as the company faced competition to sign up more students for its four-year bachelor’s degree programs, said Trace Urdan, an analyst with Signal Hill Capital Group in San Francisco. Apollo also pointed toward increased regulatory pressure from Washington, where the Obama administration is preparing new rules governing the recruitment of students by for-profit colleges.
“This is a spooky characterization, when they’re talking about significant year-over-year decline in enrollment without setting a bottom,” said Urdan, who rates the shares “buy” and doesn’t own them, in a telephone interview.
Apollo fell $6.91, or 12 percent, to $43.37 at 5:12 p.m. New York time in extended trading on the Nasdaq Stock Market after closing at $49.50. The shares have declined 33 percent in the past 12 months.
The company said in May it expected “high single-digit consolidated net revenue growth” in fiscal year 2011 and that operating income would remain unchanged.
Apollo said today that industry challenges including “ongoing regulatory and other scrutiny which has led to heightened media attention” is likely to “adversely impact its operating metrics and financial results.”
Apollo reported income from continuing operations for the fiscal fourth quarter ended Aug. 31 fell to $47.5 million, or 32 cents a share, from $97.2 million, or 62 cents a share. Revenue rose 17 percent to $1.26 billion. The company acquired BPP Holdings, the London-based provider of education services and publications, in July 2009.
Earnings excluding some items of $1.31 beat the $1.30 average estimate of 22 analysts surveyed by Bloomberg.
Apollo has been trying to sign up more four-year, bachelor’s degree students, who generate more revenue once they’re enrolled and are less likely to drop out than those in two-year associate’s degree programs, Urdan said. New bachelor’s degree enrollments rose to 36,200, from 31,700 in the year- earlier period.
New enrollment in two-year associate’s degree programs fell to 42,200 in the quarter, from 55,400 a year earlier, Apollo said. Total enrollment of new students in programs for a degree fell to 92,000 from 102,000.
Senator Tom Harkin, an Iowa Democrat, is investigating for- profit college recruitment practices, program quality and use of government funds. The Education Department plans to publish rules on or around Nov. 1 that will restore a ban on education companies’ paying recruiters based on the number of students signed up.
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