Apollo’s Warning Sinks For-Profit Educators

Apollo Group (APOL) is dragging for-profit educators down this morning after the company reduced its expectations for enrollment and earnings, showing that the impact of new federal regulations may have been underestimated. Apollo fell 13% and its peers also dropped. Apollo said it now expects enrollment for the current quarter to be flat or up [...]

Apollo Group (APOL) is dragging for-profit educators down this morning after the company reduced its expectations for enrollment and earnings, showing that the impact of new federal regulations may have been underestimated. Apollo fell 13% and its peers also dropped.

Apollo said it now expects enrollment for the current quarter to be flat or up by single-digits, down from its prior forecast for growth of around 13%. Adjusted to account for one extra day in the quarter, enrollment is expected to drop slightly. Operating profit should come in between $625 million and $725 million, down from the company’s prior forecast for profit of $655 million to $750 million. Analysts had been expecting $746 million.

“Management believes new degreed enrollment has been adversely impacted by a number of factors, including the improving labor market, the competitive environment, and changes in marketing channels to better identify potential students more likely to succeed at University of Phoenix,” the company said.

After for-profit education stocks fell hard in 2009 and 2010 amid discussions of new government regulations to increase standards and monitoring at the schools, the companies rebounded in 2011. But Apollo’s difficulty signing up new students indicates that regulations and a shift in the economy could weigh on the stocks.

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