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For-profit Education Sector Still Under Scrutiny

Posted on Friday, Dec 20th 2013

The for-profit education sector was in the news recently when President Obama mentioned in one of his gatherings [press conferences?] that they were “making out like bandits.” The president has been vocal about how the for-profit industry admits students, gets federal funding but have low graduation rates. He mentioned how the government was going to spend time during the next year to connect with professors, faculty members and students to rate good schools whether they are for-profit or nonprofit.

Apollo Group’s Financials

Apollo Group’s (NASDAQ:APOL) Q4 revenues fell 15% over the year to $845 million compared with the Street’s projections of $823 million. Their cost control efforts have brought good results, with EPS of $0.55 being significantly ahead of the market’s projected earnings of $0.25 for the quarter.

During the quarter, degreed enrollment for the University of Phoenix fell 18% to 269,000 students. New enrollment at the university fell 15% over the year to 54,100.

Apollo ended the year with revenues falling 14% over the year to $3.7 billion and an EPS of $3.16. University of Phoenix average degreed enrollment fell 16% 6o [to?] 301,100 and aggregate new degreed enrollment fell 20% to 172,900.

For the current year, Apollo projects revenues of $2.95 billion–$3.05 billion compared with the market’s projections of $3.21 billion.

Apollo’s International Expansion

Earlier this week, Apollo announced the acquisition of Open Colleges Australia Pty Limited. Open Colleges are among the oldest distance education colleges in Australia. They are the leader in online learning in Australia and have delivered more than 130 courses to over 700,000 Australians. Apollo announced plans to acquire 70% stake in the colleges for an estimated $98.5 million, with an additional $47 million payable on the year’s financial performance. Apollo also has the option to acquire the remaining 30% stake in the future. The move will help Apollo continue with its international expansion.

Apollo’s stock is trading at $26.26 with a market capitalization of $2.98 billion. It touched a 52-week high of $29.07 in October 2013.

DeVry’s Financials

DeVry University (NYES:DV) saw Q1 revenues fall 6% over the year to $450.9 million with EPS falling 58% over the year to $0.22. The market was looking for revenues of $446 million with an EPS of $0.23.

By segment, revenues from the medical and healthcare segment grew 11% over the year to $175.9 million. International and professional education segment revenues grew 18% to $43.7 million, but business, technology and management segment revenues fell 18% to $232.3 million.

DeVry’s Medical School Focus

DeVry remains focused on its medical and healthcare segment where it is already seeing strong growth. It expects demand for medical professionals to remain strong in the country as its research shows that by 2025, the U.S. will face a shortage of more than 130,000 physicians. The university is investing in the creation of an advanced anatomy lab and simulation center, a large integrated clinical medicine lab, a lecture hall, and individual and group study spaces at the American University of the Caribbean. They recently launched new graduate programs, Family Nurse Practitioner and the Doctor of Nursing Practice, to help support the growth.

DeVry’s stock is trading at $34.80 with a market capitalization of $2.20 billion. It touched a 52-week high of $38.84 in October 2013.

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