Earnings season is just about over, with almost all companies already having reported their quarterly results. But there are still a few companies left to report, and Apollo Group (APOL +0.00%) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.
For-profit education has been under siege lately and, as the operator of the industry-leading University of Phoenix, Apollo Group has been at the forefront of the controversy over the business. Let's take an early look at what's been happening with Apollo Group over the past quarter, and what we're likely to see in its quarterly report on Monday.
Stats on Apollo Group
|
| |
|---|---|
|
Analyst EPS Estimate |
$0.18 |
|
Change From Year-Ago EPS |
(69%) |
|
Revenue Estimate |
$822.8 million |
|
Change From Year-Ago Revenue |
(15%) |
|
Earnings Beats in Past 4 Quarters |
4 |
Source: Yahoo! Finance.
Will Apollo Group stay smart this quarter?
Over the past few months, analysts have greatly reduced their views on Apollo Group's earnings. They've cut their calls for the most recent quarter by $0.12 per share, although reducing a bit more modestly their full-year fiscal 2013 earnings estimates by $0.08 per share. The stock, meanwhile, hasn't done well, falling almost 19% since mid-December.
For years, Apollo Group and its peers benefited from the need for workers laid off during the recession to return to school to get training for other careers. But, more recently, enrollment has declined dramatically. Back in January, Apollo said that its overall enrollment was down 14%, with a 15% drop in new-student enrollment. That's consistent with what peers have seen lately. ITT Education (ESI +0.00%) saw its total and new-student enrollment figures fall 17% and 14%, respectively. DeVry (DV +1.29%), which has its largest emphasis on business, technology, and management, saw segment enrollment drop 15% in total, and almost 5% for new-student enrollment.
On top of bad business fundamentals, Apollo and its peers have faced scrutiny from regulators and other bodies on areas from loan defaults to student retention. For instance, Corinthian Colleges' (NASDAQ: COCO) loan default rate of 28.8% greatly exceeds the 25% level at which federal regulations could result in loss of Federal Direct Student Loans and Pell Grants as funding sources. At Apollo, the U.S. government is responsible for 91% of the company's consolidated revenue and more than 100% of its operating income, putting the for-profit educator on a path toward potentially violating the Department of Education's 90/10 rule. Moreover, with the Higher Learning Commission having put the University of Phoenix on probation, the issues of student retention and graduation rates remain important as industry watchdogs look at whether for-profit education is a good value proposition for students.
In its quarterly report, watch Apollo closely for news about its international campuses. DeVry's most recent results included strong profits from its overseas learning centers and, with Apollo having campuses in fast-growing Latin America, it could find more fertile ground outside U.S. borders.
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