Why Apollo Group Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of University of Phoenix-parent Apollo Group (NASDAQ: APOL  ) were getting an "A" from investors today, gaining as much as 15% after beating estimates in its quarterly earnings report.

So what: By its own standards, this was not a good quarter for the for-profit educator, as net income dropped 79% from a year ago, but with adjustments for one-time charges earnings per share came at $0.34, down from $0.51 a year ago, but much better than the $0.19 analysts had expected. Other key numbers were also moving in the wrong direction. Overall enrollment was down 15% and new student enrollment, generally seen as the lifeblood of the industry, was down 20%. Revenue also fell 13% to $838.4 million.

Now what: While an earnings beat generally sends shares up, the trend is the key thing to watch here. Enrollments continue to fall at for-profit colleges, taking revenue and profits with them. Public opinion on these schools seems to have shifted, and the federal government's scrutiny has also hampered the sector, which often leaves students saddled with debt they can't pay back. I'd wait for those trends to reverse before getting invested.

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8/28/2014 3:59 PM
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