ZACKS: Bear of the Day: Apollo Education Group (APOL)

Career College Central Summary:

  • Apollo Education Group (APOL – Analyst Report) became a Zacks #5 Rank (Strong Sell) in early March when shares were trading above $27, as analysts continued to lower earnings estimates ahead of the company's quarterly report.
  • On March 25, the owner of University of Phoenix, reported its first quarterly loss since early 2011. They also revealed revenues and enrollment both sank roughly 14% compared to a year ago. Shares plunged nearly 29% that day.
  • Unfortunately for APOL investors, this is not a new trend. As one headline on CNN Money proclaimed, "University of Phoenix has lost half its students." The article proceeded to give these details: "Enrollment at America's largest for-profit university was about 460,000 students five years ago. Now it's 213,000.
  • Rough Patch in For-Profit Edu
  • Last year, one of Apollo's competitors, Corinthian Colleges, was all but shut down for questionable enrollment and tuition practices. This week, it's being forced to pay a $30 million fine by the Department of Education for overstating job placement rates for graduates.
  • In 2012, the University of Phoenix closed 115 of its campuses as revenues and enrollments started their downward slide. The reasons? Overall dissatisfaction with the quality, costs, and job-getting abilities of non-traditional colleges. Plus, a swelling of student loan defaults.
  • Last March, the Obama administration proposed new limitations on federal student aid that can be used at for-profit colleges. Then this year, the President announced another initiative to make community college free, making most people question the utility and value of all higher education, but especially the for-profit companies that compete with local 2-year schools.
  • Apollo's Profit Descent
  • APOL shares were actually at a 52-week high above $34 in December. This week finds them just off of 2-year lows near $16.50.
  • The reason, of course, is a drastic decline in earnings estimates as analysts try to keep up with deterioration in the company's business. In just the past 30 days, full-year 2015 EPS projections (fiscal year ending in August) have dropped from $1.40 to $1.09.

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