Apollo Jumps Most in 19 Years as Profit Exceeds EstimatesJohn Hechinger
Apollo Group Inc., the largest U.S. for-profit college chain, surged the most in 19 years in New York trading after fourth-quarter earnings and sales topped analysts’ estimates.
Apollo, owner of the University of Phoenix, rose 28 percent to $26.80 at the close, the most since it went public in December 1994. Profit excluding some items was 55 cents a share in the three months ended Aug. 31, Apollo said yesterday in a statement. That was more than twice the 25-cent average of estimates compiled by Bloomberg.
For-profit colleges have struggled in the past three years with heightened competition from traditional universities, student reluctance to take on debt amid high unemployment and state and federal probes that raised questions about the institutions’ job-placement and other marketing claims. Apollo, based in Phoenix, has responded by closing campuses and reducing operating expenses, including an 11 percent reduction in the past quarter.
Apollo “beat expectations on continued aggressive cost control efforts” rather than from an improvement in the number of students signing up for classes, said Peter Appert, an analyst at Piper Jaffray & Co. in San Francisco. He has a neutral rating on Apollo and doesn’t own shares.
Total enrollment at the University of Phoenix fell 18 percent, to 269,000, from a year earlier, the company said. New enrollment dropped 22 percent.
The enrollment results were “slightly better” than what Jeffrey Silber, an analyst at BMO Capital Markets in New York, had expected, he said in a note today to clients.
“Trends are getting less worse, though it will be some time before top-line growth is realized,” Silber said.
Even with today’s gains, Apollo shares have lost almost two-thirds of their value since 2009.
Apollo, which announced yesterday it will change its name to Apollo Education Group next month, said it cut 3,000 non-faculty positions in the fiscal year that ended in August, and 500 more since then under a plan to close 115 locations.
Net income dropped 71 percent to $21.6 million, or 19 cents a share, in the fourth quarter, from $75.4 million, or 66 cents, a year earlier. Sales fell 15 percent to $845 million, beating analysts’ projections of $824 million. The company reported $67.3 million in restructuring expenses in the fourth quarter.
Revenue for the fiscal year ending in August 2014 will be $2.95 billion to $3.05 billion, the company said. Analysts had estimated $3.21 billion on average. The company said it expects to reduce its operating costs by $300 million in the current year.