Apollo Tumbles on Declines in Student Enrollment and Revenue

Apollo Group Inc. (APOL), operator of the University of Phoenix and the biggest U.S. for-profit college, fell the most since January in New York trading, after projecting declines in new student enrollment and revenue.

Apollo expects to report revenue of $4 billion to $4.25 billion in the year ending August 2012 and operating income, not including special items, of $675 million to $800 million, the Phoenix-based company said today in a statement. Analysts had estimated $4.55 billion in revenue and $1.1 billion in operating profit, according to a survey by Bloomberg.

Apollo’s new student enrollment may decline for the next several quarters as the company institutes a program that lets students sample classes before enrolling, Co-Chief Executive Officer Greg Cappelli told investors today in a conference call. Apollo is changing its approach as the U.S. Education Department and Congress question the student-loan defaults, dropout rates and debt levels of those attending for-profit colleges.

“We’re not making any excuses,” Cappelli said. “This has been a very challenging year. But we’re absolutely committed to always doing the right thing for our students.”

Apollo reported a net loss of $64 million, or 45 cents a share, in the second quarter ended Feb. 28, compared with a profit of $92.6 million, or 60 cents, a year earlier, according to the statement.

The company fell $1.80, or 4.3 percent, to $40.55 at 4 p.m. in Nasdaq Stock Market composite trading after dropping as much as $4.35, or 10 percent, to $38, the biggest intraday decline since Oct. 14.

New Enrollment
New student enrollment at the University of Phoenix fell 45 percent to 48,200 from a year earlier, Apollo said in the statement. Analysts had expected the figure to decline by 42 percent.

Apollo reported a loss primarily because it reduced the value of its U.K.-based BPP business, which had larger-than- expected enrollment declines, the company said in a conference call. That item and others reduced profit by about $222 million. Without these items, the company said income was $118.2 million, or 83 cents a share. The average estimate of 19 analysts surveyed by Bloomberg was 69 cents a share.

The Bloomberg U.S. For-Profit Education Index of 13 companies fell 1.5 percent. ITT Educational Services Inc. (ESI), based in Carmel, Indiana, fell $2.30, or 3.3 percent, to $68.37 in New York Stock Exchange trading. Strayer Education Inc. (STRA), based in Arlington, Virginia, fell $6.61, or 5 percent, to $127.06 in Nasdaq composite trading.

BLOOMBERG