JP Morgan downgraded Corinthian Colleges (COCO ) to underweight from overweight.
Analyst Bradley Safalow says it has become clear that the company hasn't been able to effectively manage costs as it struggles to implement an organic growth strategy and integrate acquisitions. He says he's completely shocked by the magnitude by which Corinthian has lowered its guidance. He notes Safalow now forecast 19 cents to 20 cents fourth-quarter EPS, and 86 cents to 87 cents in 2004, down from the previous estimates of 27 cents in the fourth quarter and 94 cents in 2004.
Safalow says given the visibility associated with the post-secondary-education business model, this type of earnings shortfall is unprecedented in his view, and reflects a lack of internal controls for the company.