Apollo Group Gains the Most in a Year on Profit Forecast

Apollo Group Inc. (APOL), 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 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 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 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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