Apollo Group Third-Quarter Profit Falls 40% as Enrollment Drops

Apollo Group Inc. (APOL), owner of the University of Phoenix and the biggest U.S. for-profit college, said profit in the fiscal third quarter fell 40 percent as new enrollment tumbled.

Net income for the period ended May 31 dropped to $80 million, or 71 cents a share, from $134 million, or $1.13, a year earlier, Phoenix-based Apollo said today in a statement. Excluding some items, the company had a profit of $1.05 a share, beating the 86-cent average of analysts’ estimates compiled by Bloomberg.

Apollo cut total costs by 9.5 percent in the quarter through a restructuring program and by lowering its debt. The for-profit college continues to face increased competition from not-for-profit colleges that are increasingly serving Apollo’s traditional targets: adult students who want to finish uncompleted degree programs, said Peter Appert, an analyst with Piper Jaffray & Co. in San Francisco.

“What’s changed is how much more active the not-for-profits have become in what was once the purview of the for-profit schools,” Appert, who has a neutral rating on Apollo shares, said in a telephone interview. “Fundamentally, there’s too much capacity chasing too little demand.”

Apollo rose 3.2 percent in after-hours trading. The stock gained 1.4 percent to $19.38 at the close in New York. The company has lost 7.4 percent this year.

New students signing up for classes in the period slumped 24 percent from a year earlier to 38,900.

Revenue dropped 16 percent to $946.8 million. That compares with $965.8 million, the average of analysts’ estimates.

Apollo, whose shares have slid 40 percent in the past year, will lose its spot in the Standard & Poor’s 500 Index later this week, S&P said in a statement June 20. Apollo will join the S&P Midcap 400 Index.

(Apollo will hold a conference call at 5 p.m. New York time to discuss the results. To listen, call +1-877-292-6888 in the U.S., or +1-973-200-3381 internationally. The pin is 86623109. The call will also be webcast at http://www.apollo.edu.)

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

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

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.