On Apr 30, we maintained a Neutral recommendation on the
private education service provider,
Apollo Group Inc.
). Though the company delivered better than expected results in
the second quarter of fiscal 2013, enrolments continued to
struggle. Apollo currently carries a Zacks Rank #3 (Hold).
Why the Neutral Recommendation?
On Mar 25, 2013, Apollo announced the second-quarter fiscal
2013 results. Second-quarter earnings of 34 cents per share beat
the Zacks Consensus Estimate by almost 89%. Apollo Group's
revenues also beat the Zacks Consensus Estimate by 1.6%.
We believe that both the earnings and the revenues beat the
Zacks Consensus Estimates on the back of lower-than-expected
discounts/grants. However, earnings dropped 40.4% year over year
due to lower revenues and higher advertising costs. Revenues
declined 13.3% as new student starts remained weak, declining 20%
in the quarter. Moreover, the company saw continued soft start
trends in March and expects the new student starts to continue to
decline in the third quarter as well.
Overall, we are positive about Apollo Group's dominant market
position as well as its efforts to address challenges and turn
around its business and become more competitive, going ahead.
Apollo's initiatives include investments in adaptive learning,
curriculum development, new learning systems and student service
platforms; initiatives to connect education to careers; and
significant layoffs and campus closings. Though encouraged by
these initiatives, continued weak new-enrollment trends and the
possibility of regulatory changes keep us on the sidelines.
Other Stocks to Consider
Some other education stocks that are currently doing well
New Oriental Education & Technology Group
), all carrying a Zacks Rank #2 (Buy).
APOLLO GROUP (APOL): Free Stock Analysis
CHINAEDU CP-ADR (CEDU): Free Stock Analysis
NEW ORIENTAL ED (EDU): Free Stock Analysis
K12 INC (LRN): Free Stock Analysis Report
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