The for-profit education sector took a hit in Tuesday trading after Apollo Group Inc. lowered its enrollment and operating profit expectations for the second quarter, raising concern that the industry's recovery may be slower than anticipated.
Apollo, the parent company of University of Phoenix, is one of the country's largest for-profit educators, making it a bellwether for the now tumultuous industry.
Enrollments soared for the owner of the University of Phoenix and other for-profit schools early in the recession, as the weak economy and high unemployment made education more appealing for job-seekers. But new, stricter government regulations on student loans enacted last summer, negative media reports on the for-profit sector and moves by these education providers to raise admissions standards has taken a toll on enrollment.
Apollo lowered its expectations for enrollment and operating profit on Tuesday, saying changes in how it finds students, more competition from other schools and the improving labor market hurt its fiscal second quarter results.
The company said that it expects new students enrolling in degree programs for the period to be flat to up by a low-single-digit percentage, versus its prior expectation of a roughly 13 percent gain, when it reports its second quarter on March 26. The company expects new student enrollments to fluctuate for the rest of the year.
Apollo also cut its operating profit outlook for its fiscal year to miss analyst expectations. The news sent Apollo's shares down more than 12.5 percent in afternoon trading, dropping $6.44 to $44.96.
A representative for Apollo was not immediately available Tuesday to comment further.
"While we are disappointed with this development, this is another sign, in our view, that the recovery in this sector is still some ways off," BMO Capital Markets analyst Jeffrey Silber said in a research note.
Competitor's stock prices were dragged down by the news.
Shares of Devry Inc., which operates its namesake university, fell $1.36, or 3.7 percent, to $35.44 in afternoon trading. The stock price of The Washington Post Co., which is the parent company for Kaplan, fell $5.19 to $392.80. And shares of Education Management Corp., which operates the Art Institute and a number of universities, fell more than 5 percent, dropping $1.01 to $18.11.