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As Enrollment Declines, Apollo Group And DeVry Look For Expansion Strategies

Posted on Wednesday, Oct 12th 2011

Driven by the tighter government regulations, declining student enrollments in the for-profit education sector continued to be a cause for concern. A quarter since the gainful employment regulation came into being, new student enrollment has fallen by more than 15% over the year. To help drive growth, the industry’s players are looking out to acquisitions.

Apollo Group’s Financials
For the third quarter, Apollo Group (NASDAQ:APOL) revenues of $1.24 billion fell 8% over the year but were ahead of the market’s expected revenues of $1.2 billion. EPS of $1.45 also beat the Street’s target of $1.34.

Apollo expects current year revenues to be $4.65 billion-$4.75 billion, and next year revenues are projected at $4 billion-$4.25 billion. The market was looking for revenues of $4.67 billion for this year and $4.13 billion for the year 2012.

During the quarter, University of Phoenix degreed enrollment fell 16.4% over the year to 398,400, driven by a 40.5% decrease in new degreed enrollment in the period. However, the University of Phoenix maintained the largest enrollment share with 1.86% of the market.

Apollo’s Online Expansion
Apollo introduced video content that captures the insights from influential business thinkers. The company says that this content, the Phoenix Lecture Series, was developed to enhance students’ mastery of subject areas “through a seamless and meaningful integration of technology and content.” The series uses digital info-graphics and blends content and imagery into narratives representing complex premises. The aim is to help to influence critical thinking and address social issues.

Apollo’s Acquisitions
Recently, Apollo announced the acquisition of Carnegie Learning, a math curricula publisher. The deal was valued at $96.5 million. Carnegie Learnings was founded in 1998 to provide math instructions to more than 600,000 students spread across more than 3,000 schools in the country. Apollo plans to leverage Carnegie Learning’s tools for math into the curricula of Apollo’s students.

The stock is trading at $43.53 with a market capitalization of $6 billion. It touched a 52-week high of $54.23 in July this year.

DeVry’s Financials
The DeVry University (NYSE:DV) saw Q4 revenues increase 8% over the year to $546.8 million. EPS of $1.08 grew over the previous year’s $0.99. The market was looking for revenues of $545.7 million with earnings of $1.03 per share. They ended the year with revenues growing 14% over the year to $2.18 billion and net income rising 21% to $4.68 per share.

New undergraduate enrollments for the summer period at the University fell 25.6% to 15,566, while total undergraduate student enrollments were down 5.8% to 64,317.

DeVry’s Focus on Healthcare Training
To increase their presence in the medical and healthcare segments, DeVry recently acquired American University of the Caribbean (AUC) for $235 million. AUC is an international medical school with a campus in St. Maarten with estimated annual revenues of $50 million annually on a base of 1,000 students. Further, AUC is also among the only three Caribbean-based medical schools whose students are eligible for Title IV financial aid.

Within healthcare, DeVry is planning to offer a new bachelor’s degree in healthcare administration. To cater to the growing demand, they are also looking at opening three to five locations in fiscal 2012.

DeVry’s stock is trading at $41.86 with a market capitalization of $2.86 billion. It touched a 52-week high of $66.85 in July of this year.

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