Apollo Education Group Inc., owner of the University of Phoenix, fell in late trading after disclosing it received a subpoena from the Education Department for certain marketing and recruitment records.
The Mid-Atlantic Region of the department’s Office of the Inspector General demanded records going back to the beginning of 2007 related to marketing, recruitment, enrollment, financial aid, fraud prevention, student retention and other issues at a regional Centralized Service Center in Columbia, Maryland, according to a filing today by Phoenix-based Apollo.
The shares fell 5.3 percent to $33.30 at 4:47 p.m. in New York. The stock rose 2.7 percent to $35.16 at the close.
Last month, the Obama Administration revived a proposed set of regulations, called gainful employment, that tie for-profit colleges’ eligibility for federal grants and loans to student debt and income levels. Investigations into education companies’ recruitment practice may continue to give concerns for students about taking on loans to attend the institutions, said Trace Urdan, an analyst with Wells Fargo Securities in San Francisco.
“It’s likely there’s still a brand issue and the message is falling short,” Urdan said in a telephone interview before the results were released. “Students are still apprehensive about borrowing and employment,” said Urdan, who has a market perform rating, the equivalent of hold, on the stock.
In February, the Consumer Financial Protection Bureau sued for-profit operator ITT Educational Services Inc. in Carmel, Indiana, over claims it engaged in predatory lending practices. Education Management Co., the for-profit college chain partly owned by Goldman Sachs Group Inc.; Corinthian Colleges Inc.; ITT Educational; and Career Education Corp. have said they’ve received demands for information from a network of at least 12 attorneys general.
Apollo said in the filing today that it would cooperate with the Inspector General’s demand for information.
Total enrollment at Apollo fell 16.8 percent to 250,300 in the second quarter, from a year earlier, the company said in a statement today. That compares with an estimated decline of 16.6 percent to about 250,732, from Jeffrey Silber, an analyst at BMO Capital Markets, who has an outperform rating, the equivalent of buy, on the stock.
Net income rose to $14.6 million, or 13 cents a share, from $13.5 million, or 12 cents, a year earlier, according to the statement. Profit excluding some items was 28 cents a share, compared with the 19-cent average estimate of 14 analysts, according to data compiled by Bloomberg.
Revenue fell 19 percent to $679.1 million, missing the average analyst estimate of $688.3 million.