Apollo Group seeks to attract new students as enrollments fall

Reuters News
Posted: Mar 25, 2013 1:03 PM

By Prateek Chatterjee and A. Ananthalakshmi

(Reuters) - University of Phoenix owner Apollo Group Inc plans to offer more non-degree courses in a bid to attract students after enrollments to the biggest for-profit college in the United States fell the most in four quarters.

Apollo's shares rose 9 percent after the company reported a better-than-expected profit for the second quarter, but analysts said the rally was likely to be short-lived as new student numbers lagged.

Shares of Apollo have fallen about 70 percent since the beginning of 2012, making the stock cheaper than most of its peers. The stock is valued at 6.62 times its expected earnings for the next four quarters, compared to an average of 8.06 for its peers, according to Thomson Reuters data.

Enrollments at Apollo and the rest of the U.S. for-profit education industry have been hit after government scrutiny revealed fraud related to financial aid, worryingly high student debt loads and low rates of graduation and job placement.

Apollo said student sign-ups fell 20 percent in the second quarter ended February 28. The decline was bigger than the 13 percent fall that Wall Street had expected, Robert W. Baird analyst Jeffrey Mueler said in a note.

Third-quarter enrollment rates have been similar so far this quarter, Chief Executive Greg Cappelli said on a post-earnings conference call. He said he could not predict when the enrollment numbers would begin to climb again.

Apollo, which had earlier expected new student enrollments to start growing again in the second half of the fiscal year ending August 2013, has already frozen tuition fees and boosted marketing efforts to attract students.

Cappelli said the University of Phoenix was launching new career-oriented programs, such as certificate courses, and expanding partnerships with corporate customers.

"Students require more than just one option to acquire the knowledge to compete more effectively in today's labor force," he said. "They're interested in acquiring tangible skills, which support a full degree program if desired."

He also said Apollo would also venture into new countries in the near future.


Excluding one-time items, Apollo posted net earnings of 34 cents per share for the second quarter, beating Wall Street estimates of 18 cents.

Second-quarter revenue fell 13 percent to $834.4 million, but were ahead of the $822.8 million analysts had expected, according to Thomson Reuters I/B/E/S.

"Given how low expectations were heading into the quarter, there could be some near-term relief," Stifel Nicolaus analyst Jerry Herman said.

Apollo has cut about 1,000 jobs so far in fiscal 2013, and carried out 25 percent of its planned campus closures, it said on Monday.

The company had said in October it would cut about 800 jobs and shut down 115 locations, including 25 campuses, to save costs amid declining profit and lower student enrollments.

"Efforts to regain enrollment momentum in a continued challenging overall operating environment will take time, thus the shares still lack a sustainable catalyst," Herman said.

The company expects its previously announced restructuring actions to reduce operating expenses by at least $350 million by fiscal year 2014, raising the estimate by $50 million from its earlier target.

Apollo reaffirmed its full-year earnings and revenue forecast. The stock was up 9 percent at $18.63 on the Nasdaq on Monday, having risen as much as 15 percent during the day.

(Editing by Sreejiraj Eluvangal)