On Jul 15, we issued an updated research report on
Apollo Education Group, Inc.
The company reported strong third-quarter fiscal 2014 results on
Jun 25, beating the Zacks Consensus Estimate for both earnings and
However, earnings of 61 cents per share declined 27.6% year over
year as a relatively better top-line performance was offset by
weaker margins. Revenues declined 15.5% due to 15.9% decrease in
total enrollment at Apollo's flagship institution, University of
Phoenix, which accounts for 90% of its revenues.
Apollo's enrollments have been sluggish for many quarters due to
regulatory challenges, changes and stiff competition in the higher
education industry. Enrollment trends throughout the industry have
been affected by changing regulatory requirements, sluggish demand
due to students' aversion to debt, robust competition and a
Encouragingly, however, starts improved sequentially in all the
quarters reported so far in 2014, indicating that the company's
branding, program diversification and student retention initiatives
are gradually yielding results.
The company is consistently enhancing and expanding its services
and investing in academic quality to improve student experience and
outcomes. Apollo's initiatives include investments in adaptive
learning, new degree and certificate-based programs, new modernized
and significantly upgraded online classroom, and new learning and
service platform. In addition to these growth enhancing
investments, innovation and recent price cuts should improve
student value proposition and retention rates.
Moreover, Apollo's accelerated efforts to right-size its
business through significant layoffs and campus closings offer
competitive advantage. In fact, since 2012, Apollo Education has
lowered its cost base - mostly fixed expenses - by roughly $900
million, making the company leaner, efficient and more
Though we believe these turnaround efforts should eventually
improve enrollment trends and boost margins, enrollments are
unlikely to return to positive growth any time in the near
Other Stocks to Consider
Apollo Education carries a Zacks Rank #3 (Hold). Better-ranked
education stocks worth considering include
TAL Education Group
DeVry Education Group Inc.
Capella Education Co.
). While TAL Education and DeVry sport a Zacks Rank #1 (Strong
Buy), Capella has a Zacks Rank #2 (Buy)
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APOLLO GROUP (APOL): Free Stock Analysis Report
DEVRY EDUCATION (DV): Free Stock Analysis
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