Why Apollo Group Stock Popped

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 Apollo Group (NASDAQ: APOL  ) were getting an A from investors today, gaining as much as 25% after the company flew past expectations in its fourth-quarter earnings report.

So what: The University of Phoenix parent said adjusted earnings per share came in at $0.55, well ahead of estimates at $0.25, while revenue fell 15% to $845 million, but that also topped the analyst consensus at $823.1 million. For-profit educators have seen declining enrollment numbers lately amid a crackdown by the government and a sense of consumer fatigue for the industry, so a smaller drop than expected is still a positive. Enrollment was sharply down in the quarter, falling 18.1% overall, while new student enrollment, often seen as the lifeblood of the industry, dropped 22.3%, indicating that a bottom on enrollment still seems far away.

Now what:  Apollo sees a similar drop in revenue next year, as its projecting sales of $2.95 billion to $3.05 billion, down more than 20% from $3.7 billion this year, and below analyst estimates of $3.2 billion. Still, the company actually expects modest growth in adjusted operating income next year due to cost-cutting initiatives, which it said would trim $300 million in expenses. That prediction seemed to reassure investors since the company still managed to deliver an adjusted per-share profit of $3.16 this year, making the stock look cheap. I'm skeptical that for-profit education will reach its former heights, but Apollo has easily beat earnings estimates in its last four quarters, despite the negative growth. Its management seems to understand how to optimize a declining business.

Looking for real growth stocks?
Tired of watching your stocks creep up year after year at a glacial pace? Motley Fool co-founder David Gardner, founder of the No. 1 growth stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks. And he wants to share it, along with a few of his favorite growth stock superstars, WITH YOU! It's a special 100% FREE report called "6 Picks for Ultimate Growth." So stop settling for index-hugging gains... and click HERE for instant access to a whole new game plan of stock picks to help power your portfolio.



Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2695127, ~/Articles/ArticleHandler.aspx, 11/1/2014 3:30:49 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement