Apollo Group, Inc
) reported adjusted earnings (excluding special items) of $1.22
per share in the first quarter of fiscal 2013, surpassing the
Zacks Consensus Estimate of 90 cents by 36%. However, lower
revenues resulted in a 3.2% downslide from the prior-year
earnings of $1.26 per share.
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Apollo Group reported net revenue of $1.1 billion in the first
quarter of fiscal 2013, down 8.3% from the prior-year quarter due
to 14.3% decline in degreed enrollment in University of Phoenix.
Revenue, however, beat the Zacks Consensus Estimate of $1.03
billion by 6.8%.
We believe that Apollo beat the top and bottom line estimates on
the back of better-than-expected enrollment results achieved by
the University of Phoenix during the quarter. The decline in
enrollment was narrower than the company guidance. However,
revenue per students grew 3% year over year, driven by improved
pricing and favorable students mix.
University of Phoenix - This segment offers bachelor's, master's
and doctoral programs in 40 states in the U.S., the District of
Columbia and Puerto Rico. It also offers online programs to
students across the globe.
The University of Phoenix reported a decline of 14.3% in degreed
enrollment to 319,700 students in the first quarter of fiscal
2013. New enrollment (or new degreed enrollment) at University of
Phoenix declined 15.1% from the prior-year quarter to 54,100. The
company results were better than the company's expectation of 17%
year over year decline.
Compared to the prior year quarter results, the company's
Associates Degree revenue in the first quarter of 2013 was $251.9
million, down 19.7%; Bachelor's Degree revenue was $560.8
million, down 5.4%, Master's Degree revenue declined 11% to
$158.9 million and Doctoral Degree revenue was $20.7 million,
Apollo Group has been witnessing persistent decline in enrollment
due to the weak macroeconomic environment and subsequent decline
in demand for courses (due to the hesitancy over taking a loan)
in the U.S.
The company incurred adjusted operating expenses of $817 million
in the quarter, down 8.0% from the prior-year quarter, driven by
decline in expenses. Instructional and student advisory cost
decreased to $432.2 million during the quarter, down 4.7% year
over year, driven by cost control initiatives taken by the
The company is taking several initiatives to drive growth in the
upcoming quarters. The company intends to differentiate
University of Phoenix as well as to diversify Apollo Group, in
order to raise the quality of education offered to students and
student outcome. Apollo's other initiatives include investments
in adaptive learning, curriculum development, new learning
systems and student service platforms; and initiatives to connect
education to careers. Also, the company is coordinating
with 2,000 other corporate companies to educate their workforce.
At the first quarter conference call, the company issued the net
revenue guidance range of $3.65 to $3.75 billion, narrower than
prior expectations of $3.65 to $3.80 billion for fiscal 2013. The
company continues to expect new degreed enrollment growth to
become positive some time in fiscal 2013. Adjusted operating
income is expected to be in the range of $500.0 to $550.0 million
compared with the prior guidance of $525 to $575 million in
Revenue per student is expected to range from negative 1% to 2%
for the remainder of fiscal 2013. Total marketing cost is
expected to increase 15% during the second quarter 2013, driven
by increased advertising expenditure.
A peer of
), Apollo carries a Zacks Rank #3 (Hold) for the near term.
Currently, we have a Neutral recommendation on the company over
the long term.
Overall, we like Apollo Group's dominant market position as well
as its efforts to address its challenges and improve business
over the long term. Though encouraged by these initiatives,
we still prefer to stay on the sidelines due to the trimmed
guidance, choppy enrollment trend and possibility of regulatory