ITT Educational Services, Inc
) third quarter 2012 earnings of $1.83 per share beat the Zacks
Consensus Estimate of $1.75 by 4.6%. However, earnings for the
quarter dropped 26.2% year over year due to lower
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Quarterly revenue totaled $314.7 million, down 12.7% from the
prior-year quarter due to weak enrollments. Total revenue also
missed the Zacks Consensus Estimate of $316 million.
Quarter in Detail
The company witnessed a 17.1% year-over-year decline in total
enrollment to 65,662 students. The overall decline in enrollment
mainly resulted from a 15.8% drop in new enrollment to 19,298
students. New student enrollment witnessed a decline of 36% in
Graphic Designs and criminal justice programs and a 12% drop in
the drafting, network administration and electronics programs.
Of late, most of the education companies have been crippled by
poor new enrollment growth. The company's closest competitor,
Apollo Group Inc.
) reported a decline in fourth -quarter enrollments at the
University of Phoenix -- the company's wholly owned subsidiary --
which pulled down its total revenues for the quarter.
However, ITT Educational's revenue per student grew 3.5% from the
prior-year quarter to $4,740 benefiting from enrollment increases
in the electronics technology, business and healthcare-related
programs in a number of institutes. Student persistence rates
declined 170 basis points to 69.8% in the quarter since the
number of continuing students in the quarter also dipped 17.7%.
During the quarter, ITT Educational witnessed a 17% decrease in
advertising expenditures as management focused on improving
efficiencies in the student enrollment processes by reducing
The company reduced its adjusted earnings per share guidance from
the range of $8.00 to $9.00 to an adjusted range of $8.00 to
$8.10, owing to volatile enrollment growth.
A peer of
), ITT Educational Services carries a Zacks #4 Rank in the near
term (Sell rating). We currently have a Neutral recommendation on
ITT Educational Services.
We appreciate the company's continuous efforts to improve
services and thereby student experience and outcomes. However,
choppy enrollment trend and possibility of regulatory changes
keep us on the sidelines.