Apollo Jumps As Sales, Profit Beat Analysts’ Estimates

Apollo Group Inc. (APOL), the largest U.S. for-profit college chain, rose the most in almost four months as second-quarter profit and sales topped analysts’ estimates, even as enrollment fell.

Apollo rose 7.1 percent to $18.25 at the close in New York, the most since Dec. 4. While sales in the period ended Feb. 28 dropped 13 percent to $834.4 million, they were higher than the $824.7 million average of estimates compiled by Bloomberg.

Net income in the quarter dropped to $13.5 million, or 12 cents a share, from $63.9 million, or 51 cents, a year earlier, Phoenix-based Apollo said today in a statement. Profit excluding some items was 34 cents a share, topping analyst’s average 19- cent average.

Apollo’s profit was driven by the higher-than-expected revenue combined with “slightly better cost controls,” Jeffrey Silber, an analyst at BMO Capital Markets Corp., said today in a note to investors. He rates the shares “outperform.”

Total enrollment at the company’s University of Phoenix fell 15 percent, to 300,800 from a year earlier, the company said. New enrollment dropped 20 percent to 38,900.

“We’ve been aggressive in managing our costs and as a result have increased our target savings by $50 million,” said Gregory Capelli, the chief executive officer, in a conference call with analysts and investors. “We now anticipate delivering a minimum of $350 million in savings through the 2014 year as compared to 2012.”

The company maintained its forecast from January for fiscal 2013 sales of $3.65 billion to $3.75 billion.

Fewer students are signing up to attend Apollo and other for-profit colleges amid high U.S. unemployment, competition from traditional colleges’ online courses and federal and state investigations raising questions about the industry’s loan defaults and marketing claims.

“We want to be more bullish on Apollo shares given a historically low valuation,” said Peter Appert, an analyst at Piper Jaffray & Co. in San Francisco, who has a neutral rating on the shares. “The problem is enrollment/start trends remain anemic and visibility is exceptionally low.”

In February, Apollo said its accreditor, the Higher Learning Commission, had recommended the university be placed on probation because of “alleged administrative and governance deficiencies.” Apollo said it would appeal the decision.

Apollo shares have declined 13 percent this year.

(Apollo held a conference call at 8 a.m. New York time today. To listen to a replay, call +1-855-859-2056 in the U.S. and +1-404-537-3406 from abroad. The pin code is 12434663.)

To contact the reporters on this story: Oliver Staley in London at ostaley@bloomberg.net; John Hechinger in Boston at jhechinger@bloomberg.net

To contact the editor responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net

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