Sector Snap: For-profit education

Apollo Group Inc.'s strong third-quarter results and student enrollments outlook helped boost shares of other for-profit education providers Tuesday.

Total student enrollments at the company, which operates the University of Phoenix and other institutions, grew 22 percent to 420,700 in the three months ended May 31, while new enrollments were up 23 percent to 87,500, beating expectations, Deutsche Bank analyst Paul Ginocchio said in a note to investors.

"Apollo Group beat consensus on all key metrics," Ginocchio said, and the Phoenix-based company's management said enrollment trends for the current quarter were looking similar to the third quarter.

A slew of analysts boosted their profit estimates for Apollo Group after its earnings release Monday. Analysts surveyed by Thomson Reuters had expected profit of $3.97 per share in 2009 and $4.79 per share in 2010.

Rising unemployment _ which stood at 9.4 percent as of May and is largely expected to rise above 10 percent this year or next _ has been a boon to the sector, as Americans struggle to improve their resumes in a competitive hiring environment.

"An increasingly challenged economic environment could continue to spur strong enrollment growth over the next several quarters," said Wedbush Morgan analyst Ariel Sokol, and the company predicted increasing profitability.

William Blair analyst Brandon Dobell said Apollo's quarter didn't provide "a lot of read-through for other education stocks, other than to say that demand remains robust."

Steps by the Obama administration could also help the for-profit education sector. The government wants to funnel $9 billion over 10 years to community colleges, according to Inside Higher Ed, an education trade publication

BMO Capital Markets analyst Jeffrey Silber said for-profit education could be eligible for those funds. William Blair analyst Dobell said he thought the money was meant only for public institutions, but that he believes "more students considering higher education will be a positive for the for-profit providers."

Apollo shares rose $5.55, or 8.4 percent, to $71.54 in afternoon trading. DeVry Inc. stock was up $2.30, or 4.8 percent, to $50.10, while Career Education Corp. gained $1.08, or 4.6 percent, to $24.84. ITT Educational Services Inc. jumped $6.52, or 6.9 percent, to $101.61, Corinthian Colleges Inc. was up 68 cents, or 4.2 percent, to $16.90, and Lincoln Educational Services added 63 cents, or 3 percent, to $21.34.