Apollo Group Inc (APOL), Strayer Education Inc (STRA): Enrollments Continue to Decline at For-Profit Schools

Back in October, I asked whether the third-quarter earnings coming out of the for-profit education sector were a sign that the industry — as we know it — was nearing its end. My thesis was based on the fact that enrollment in the schools was falling and the government was looking to end its easy-money policy in paying tuition for students who simply weren’t benefiting from the schools.

Below, I’ll let you know how some of the industry’s biggest players have fared, and at the end, I’ll offer up access to a special free report on our top stock for 2013.

Apollo Group Inc (NASDAQ:APOL)Apollo Group Inc (NASDAQ:APOL)
There’s no for-profit educator as big as Apollo, the parent group of the 300,000-student University of Phoenix. When you’re looking to see how the entire sector is doing, Apollo is a logical place to start.

The school announced earnings in early January, and the results weren’t pretty. Though earnings were actually up compared to the same period in the previous year, there were significant declines in student enrollment.

Source: SEC filings.

The school currently has roughly 320,000 students registered, which is a 14.3% decline from the same time last year. And though it may be hard to appreciate the second cluster on the graph, the decline in new student enrollments is also significant, as they fell by an even larger 15.1%.

Adding to the company’s list of concerns, Apollo announced that 91% of consolidated revenue and over 100% of operating income is coming from one source: the United States government. That exceeds the 90/10 rule set by the Department of Education, though Apollo has a slight reprieve since the rule is calculated based on the trailing-two-year ratio.

But possibly most important, Apollo received word just this past January that the University of Phoenix would be placed on probation by the Higher Learning Commission. The designation is due to the fact that the commission believed: “the University of Phoenix has insufficient autonomy relative to its parent corporation and sole shareholder, Apollo Group Inc.” The Commission also said that there were concerns with the company’s retention and graduation rates, and assessment of student learning, among other things.

Other schools having a rough outing
Shareholders in ITT Educational Services, Inc. (NYSE:ESI) Education and Strayer Education Inc (NASDAQ:STRA) have also dealt with their fair share of unpleasant news lately.

ITT’s stock plunge was predicated on news that the SEC was investigating the company’s PEAKS Private Student Loan program and the accounting of those loans. It probably doesn’t help that total student enrollment fell 16.6% in 2012, and new student enrollment decreased 13.9%.

Shareholders of Strayer met bad news as well last week. Average enrollment for the school fell 8% in 2012, with revenue falling 10% and earnings per share sinking 35%.

Are there any bright spots?
The earnings season wasn’t all bad for shareholders, though.

Shares of DeVry Inc. (NYSE:DV) took a big jump in early February. Though revenue was down 3.6% for the fourth quarter, earnings were up 500% — mainly due to a really poor fourth quarter last year and a decrease in student service expenses.

That said, undergraduate enrollment in the school’s largest segment — business, technology and management — declined 14.9%, while new student enrollment declined by 4.7%.

Education Management Corp (NASDAQ:EDMC) was another stock that pleased shareholders recently. I would have to say, however, that this was more due to incredibly low expectations being beat than a significant improvement in the underlying business.

For the fourth quarter, the company logged a revenue decrease of 11.2%, combined with an earnings decrease of almost 50%. More important, total average enrollment fell by 12.7%, while new student enrollment dropped even more — by 21.9%.

Is there a takeaway?
Though there were some bright spots for investors, there’s no doubt that the for-profit education model remains in flux. Where exactly things will stabilize is impossible to tell — but for now, the chickens are coming home to roost for an industry that put easy profits far higher on its list of priorities than the students it was serving.

The article Enrollments Continue to Decline at For-Profit Schools originally appeared on Fool.com and is written by .

Fool contributor Brian Stoffel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Education Inc
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!