ITT Educational Services Inc.
), one of the leading providers of technology-based post-secondary
degree programs in the U.S., reported fourth-quarter and full year
2011 results that outperformed the Zacks expectation.
ITT Educational's fourth quarter earnings of $2.87 per share
smoothly surpassed the Zacks Consensus Estimate of $2.31. However,
earnings for the quarter dipped 8.6% compared to the year-ago
quarter earnings of $3.14 per share.
For full-year 2011, the company's earnings per share of $11.13
showed a significant rise from the Zacks Consensus Estimate of
$10.56 while it dropped 0.4% from $11.17 earned for full-year
ITT Educational registered a 10.2% decline in revenue in the
fourth quarter. Quarterly revenue totaled $368.3 million compared
with $410.1 million in the prior-year quarter. Revenue for the full
year was $1.5 billion, a decline of 6.0% from $1.6 billion in the
In fourth-quarter 2011, the company witnessed a 13.5% decline in
total enrollment to 73,255 students compared with 84,686 students
in the prior-year period. The overall decline in enrollment was
mainly attributable to a 14.7% drop in new enrollment to 15,125
students due to an 80% decline in new student enrollment in the
school of criminal justice. Revenue per student inched down 0.2% to
$4,694 in the fourth quarter, while it declined 2.8% to $18,370 for
the full year.
During the quarter, ITT Educational witnessed a 9.7% increase in
advertising expenditures. The increase was, however, below the
company's estimated 15% to 20% increase for the fourth quarter. The
better-than-expected result was mainly due to the company's shift
from using the low-cost less result oriented media or the expensive
traditional media forms to alternative sources focused on producing
higher rates of return.
This shift in media mix resulted in a decline in the number of
probable students interested in the company's study programs. In
the fourth quarter, the company also reduced the number of
admission representatives by 22%. However, the media shift helped
increase the rate of prospective students that transformed into new
Going forward, ITT Educational expects the number of admission
representatives at the end of 2012 to be at the same level as at
the end of 2011.
The company pointed out that its graduate employment metrics
continue to suffer due to the slow economy and high unemployment
rate. However, the company sees some hope of improvement as its
graduate employment rate of 2011 employable graduates as of January
24, 2012, increased nearly 580 basis points from the year-ago
period. Also, average annual salary of its 2011 employed graduates
showed an improvement of 1% from last year.
On a further optimistic note, the company continues to expand
geographically with five new ITT technical institutes started in
Deerfield Beach, Florida; Grand Rapids, Michigan; Salem, Oregon;
Overland Park, Kansas; and Indianapolis, Indiana, during the fourth
The company's nearest competitor
Apollo Group Inc.
) recently reported its first-quarter 2012 earnings per share of
$1.28, declining 21.5% from the prior-period earnings of $1.63.
However, earnings surpassed the Zacks Consensus Estimate of $1.18
Currently, we have a long-term Neutral rating on ITT
Educational. The stock holds a Zacks #3 Rank, which translates into
a short-term 'Hold' recommendation.
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