One of the leading private education service providers in the U.S, Apollo Group Inc. (APOL) recently touched a 52-week low of $17.81 on Feb 25, 2013 following the recent cut in its fiscal 2013 revenue and profit expectations.
Factors Hurting Apollo Group
Estimates for this leading homebuilder have been going down significantly after the release of its first quarter 2013 results on Jan 09.
At its first quarter 2013 conference call, Apollo narrowed its fiscal 2013 top-line guidance despite beating the top and bottom line estimates in the quarter.
Apollo narrowed its previously provided fiscal 2013 net revenue guidance to a range of $3.65 to $3.75 billion from prior expectations of $3.65 to $3.80 billion. The revenue guidance was trimmed as new enrollment trends in the month of December were below expectations and deteriorated more than the first quarter level. It is worth noting that this quarter is seasonally the weakest for Apollo in terms of revenue growth due to holiday breaks.
Revenue per student is expected to range from negative 1% to 2% for the remainder of fiscal 2013 as Apollo plans to offer higher discounts in the year. In the second quarter, the company expects revenues to be hit by about $25 million as discounts increase. Discounts are expected to increase as a percentage of revenues to roughly 10% in the second quarter and then come down to 8% for the full year 2013. Moreover, though improving lately, new enrollments are expected to become positive only by the end of fiscal 2013.
Adjusted operating income guidance was also reduced to a range of $500.0 to $550.0 million from the prior guidance of $525 to $575 million for fiscal 2013. Expected increase in advertising expenses in the second quarter may have called for the cut in operating income guidance.
Apollo carries a Zacks Rank #3 (Hold).
Education companies that currently appear to be better positioned than Apollo Group include American Public Education Inc. (APEI) with a Zacks Rank #1 (Strong Buy) and DeVry, Inc (DV) ) and Grand Canyon Education, Inc. (LOPE) both with a Zacks Rank #2 (Buy).