As the economy sours, ITT Educational Services is reaping sweet rewards with spikes in enrollment and revenue spurred by the increasing numbers of unemployed workers going back to school for training.
The Carmel-headquartered company, which runs 114 schools under the name ITT Technical Institute, saw revenues jump 21 percent to $279.8 million in the final quarter of 2008.
New student enrollment during that same period rose 29 percent to 14,911. And ITT’s stock hit a 52-week high of $133.75 on Feb. 3. That’s a 46 percent jump from a year ago when shares were trading at $91.52.
It’s a rare bright spot in a market that last week saw the Dow Jones industrial average and the Standard & Poor’s 500 index reach their lowest levels in 11 years.
"Why are they doing so well? A big part is the economy. People are getting laid off and going back to school," said Justyn Putman, an analyst with Gabelli & Co. in Rye, N.Y., who covers ITT. "Opportunity calls, and ITT is benefiting from that."
The 40-year-old for-profit company operates its technical institutes in 37 states, providing technology-oriented postsecondary degree programs. The school caters to adult learners, offering plenty of evening classes as well as online degrees. Total enrollment nationwide is about 62,000.
ITT officials declined to be interviewed for this story, pointing to investor earnings reports on its Web site.
"As we entered 2009, demand for our programs of study remained incredibly strong as prospective students recognized the importance of learning new skills and enhancing their existing competencies through a high-quality postsecondary education in order to improve their career prospects," said Kevin M. Modany, chairman, chief executive officer and president of ITT, when the company announced fourth-quarter results.
While the company had a stellar 2008, its stock has taken a bit of a hit lately as more students default on loans. But ITT Educational’s stock closed Friday at $113.50, up 2.5 percent, or $2.81.
Investors get worried when it comes to the percentage of students defaulting because too much debt accumulates and schools can lose their accreditation and funding, Putman said.
"That’s all that happened there with the stock," he said. "Overall they have been doing real good."
Unfortunately, part of ITT’s gain comes at a cost: unemployment.
The U.S. Department of Labor said Thursday the number of newly laid-off Americans seeking unemployment benefits rose to 667,000 from the previous week’s figure of 631,000.
That same day, Christina Romer, chairman of the President’s Council of Economic Advisers, said the unemployment rate for U.S. workers in 2009 will average just above 8 percent. In December, Indiana’s unemployment rate was 8.2 percent.
All those unemployed Hoosiers are going en masse to the state’s Department of Workforce Development to get grant money for training, said spokesman Marc Lotter. And the state hands out that money only if students are getting certificates, training or associate’s degrees in high-growth, high-demand fields. Among those are nursing and other medical careers, information technology jobs and trades such as welding.
ITT is the type of school many Hoosiers are turning to, Lotter said.
"They want that training and skills quickly so they can get back in the job market," he said.
ITT operates six curriculums — information technology, drafting and design, electronics technology, business, criminal justice and health sciences. Hundreds of degrees are offered. Most programs blend traditional academic content with applied learning concepts, and a significant portion is devoted to practical study in a laboratory environment.
While enrollment has jumped significantly and many students are pleased with their academic experience, ITT has its critics.
Johnathan Reed of Indianapolis enrolled in ITT’s criminal justice program and was astounded by the cost.
The average annual tuition is $15,600 at ITT. That compares with $7,368 at Indiana University, a public institution, and $27,500 at private Butler University.
"You aren’t proud to have (ITT) on your resume anyway when you are done," he said.
Analyst Putman said the college is fairly priced. Indiana Institute of Technology, a comparable school in Fort Wayne, has annual tuition of $19,480.
GETTING HIGH MARKS
For the last 16 quarters, ITT Educational has posted year-over-year revenue increases. In its most recent quarter, revenues surged 21 percent:
(all figures in millions)
2005 2006 2007 2008
Q1 160.15 176.32 204.17 234.85
Q2 168.78 185.57 216.98 246.41
Q3 176.76 189.67 217.93 254.27
Q4 182.30 206.21 230.42 279.80
Total 688.0 757.76 869.51 1015.3
Source: Bloomberg, ITT Educational