Apollo Slides After Profit Falls on Sagging EnrollmentJohn Lauerman
Apollo Group Inc., owner of the University of Phoenix and the biggest U.S. for-profit college, fell the most in eight months after saying that net income and new enrollment tumbled in its fiscal third quarter.
Apollo dropped 10 percent to $17.39 at the close in New York, the most since October 2012. The Phoenix-based company, which released earnings results yesterday after U.S. markets closed, has declined 17 percent this year.
The education company cushioned the impact of a decline in new student signups by cutting costs through a restructuring program and debt reduction. Efforts to raise Apollo’s profile among potential students through a rebranding effort and partnerships with employers to place graduates in jobs haven’t changed registration trends, said Jarrel Price, an analyst at Height Analytics in Washington.
“We need to get a clarity about the true causes of the continued deterioration in new student enrollment,” Price, who doesn’t rate the shares, said yesterday in a telephone interview. “These results may be a further indication that rebranding takes time.”
Net income for the period ended May 31 fell to $80 million, or 71 cents a share, from $134 million, or $1.13, a year earlier, Apollo said yesterday in a statement. Excluding some items, profit was $1.05 a share, beating the 86-cent average of analysts’ estimates compiled by Bloomberg.
New students signing up for classes in the quarter slumped 24 percent from a year earlier to 38,900, Apollo said.
The drop in enrollment at the University of Phoenix is “difficult to accept,” Chief Executive Officer Greg Cappelli said on a conference call following the earnings results. “We’re focused on truly engaging students, creating an environment that addresses their needs and delivering better outcomes” for graduation and on the job front, he said.
Declining enrollment has come amid increased scrutiny over the past few years by Congress, state attorneys general and the U.S. Education Department over for-profit colleges’ marketing practices. The schools’ students also have a higher rate of government student-loan defaults than those at non-profit colleges.
Total costs fell 9.5 percent to $814.8 million from a year earlier. Apollo’s cost cutting included a 32 percent drop from the year-earlier quarter in admissions advisory expenses.
Apollo 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.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.