Apollo Group Shares Plunge as Student Enrollment Declines

Joe Goldman |

 

Shares of Apollo Group (APOL) plunged almost 10 percent during trading hours on Wednesday after the for-profit education company reported disappointing enrollment numbers and guidance.

Apollo Group announced revenue of $947 million and EPS of $0.71, or $1.05 excluding special items. Analysts were expecting revenue of $964.6 million and EPS of $0.86, so on the surface these numbers appeared satisfactory.  The stock initially reacted positively and rose several percent after-hours.

Investors were spooked, however, after the company reported a massive 17 percent decline in total enrollment and a 25 percent plunge in new enrollment at their flagship subsidiary University of Phoenix.  As a result, the company expects a 1-2 percent decline in revenue for the next fiscal year, falling short of consensus estimates.

Apollo Group’s executives spoke vaguely about why the University of Phoenix is losing so many students, but most of its problems likely relate to macroeconomic conditions.

Apollo Group’s stock and student enrollment hit an all-time high at the beginning of 2009 when global markets were in free-fall and job openings were scarce.  Now that the job market is improving, more prospective students may prefer to attend public and private 4-year colleges, or immediately enter the workforce.

There’s nothing Apollo Group can do about a strong economy, so CEO Gregory Cappelli has focused on repositioning and restructuring the company as the educational landscape evolves.

“We are creating a more nimble organization and reengineering our learning solutions to better support our students’ needs and meet the demand of employers. We are focused on making the necessary changes to deliver an improved set of educational offerings,” Cappelli said.  In the conference call, Cappelli emphasized Apollo’s restructuring efforts and appeared to have strong grip on how the company can grow and adapt moving forward. 

However, this was not enough to save shareholders. The stock traded as low as $17.35 on Wednesday, approaching its 13-year low of $15.98.

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Companies

Symbol Name Price Change % Volume
APOL Apollo Education Group Inc. 9.49 -0.01 -0.11 606,213
CMCSA Comcast Corporation Class A Common Stock 68.78 -1.08 -1.55 13,361,365

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