Apollo Group Inc.
) reported adjusted earnings (excluding special items) of $1.05
per share in the third quarter of fiscal 2013, surpassing the
Zacks Consensus Estimate of 85 cents by 98.8%. However, lower
revenues due to weak enrollment resulted in an 11.0% decline from
the year-ago quarter earnings of $1.18 per share.
Apollo Group reported net revenue of $946.8 million in the
third quarter of fiscal 2013, falling short of the Zacks
Consensus Estimate of $963 million by 1.7%. Revenues declined
15.6% from the prior-year quarter due to decline in enrollment at
the University of Phoenix.
We believe that Apollo may have beaten the bottom line
estimate on the back of cost savings resulting from its
University of Phoenix
, offers bachelor's, master's and doctoral programs in the U.S.,
the District of Columbia and Puerto Rico. It also offers online
programs to students across the globe. The University has been
accredited by The Higher Learning Commission of the North Central
Association of Colleges and Schools and also holds other
Revenues declined 16.3% at the University of Phoenix to $846.5
million in the third quarter 2013 due to decline in enrollments
and increase in discounts and grants. The University reported a
decline of 17.0% in degreed enrollment to 287,500 students in
third quarter 2013. New enrollment (or new degreed enrollment) at
University of Phoenix declined 24.5% from the prior-year quarter
to 38,900 in third quarter 2013.
The decline was due to changing regulatory requirements,
robust competition and a volatile economy. Apollo Group has been
witnessing persistent decline in enrollment due to the weak
macroeconomic environment and subsequent decline in demand for
education (due to the hesitancy over taking a loan) in the U.S.
During third quarter 2013, the company's Associates Degree
revenues were $205.2 million, (down 23.9%) Bachelor's Degree
revenues were $529.9 million (down 11.8%), Master's Degree
revenues were $152.9 million (down 10.1%) and Doctoral Degree
revenues were $19.8 million (down 15.0%).
reported net revenue of $87.4 million in third quarter 2013, down
1.1% year over year.
segment includes revenues from Institute for Professional
Development (IPD) and The College for Financial Planning
Institutes Corporation (CFFP). The segment reported revenues of
$12.9 million in the third quarter of 2013, down 41.9% year over
year, due to decline in revenues at IPD.
On a reported basis, operating income declined 40.4% to $132.0
million in the third quarter of 2013. Operating margin declined
580 basis points to 13.9% in the quarter. Adjusted operating
margin declined 720 basis points to 21%. Instructional and
student advisory cost was $393.4 million in third quarter 2013,
down 15.6% year over year. Costs declined as a result of lower
The company incurred marketing expenses of $156.9 million in
the third quarter of 2013, down 1.1% year over year, due to
decline in advertising expenses. However, as a percentage of
revenues, marketing expenses increased 250 basis points.
The company reported declines in all operating expenses during
the quarter, driven by lower enrollment and the company's
restructuring efforts to turn around its business, including
significant layoffs and campus closings. However, as a percentage
of revenues, expenses increased due to drastic decline in
The company tightened its previously provided fiscal 2013 net
revenue guidance to a range of $3.65 - $3.70 billion versus $3.65
to $3.75 billion guided previously. Adjusted operating income for
2013 is expected in the range of $525 - $550 million compared
with the earlier guided range of $500.0 to $550.0. The company
has also increased its savings target to at least $400 million
through 2014, of which $300 million is expected to be realized in
Apollo Group carries a Zacks Rank #3 (Hold).
Education stocks such as
New Oriental Education & Technology Group
Grand Canyon Education, Inc.
) are currently performing well and are worth considering. ATA
carries a Zacks Rank #1 (Strong Buy), whereas New Oriental
Education & Technology Group and Grand Canyon Education hold
a Zacks Rank #2 (Buy).
APOLLO GROUP (APOL): Free Stock Analysis
ATA INC-ADR (ATAI): Free Stock Analysis
NEW ORIENTAL ED (EDU): Free Stock Analysis
GRAND CANYON ED (LOPE): Free Stock Analysis
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