UPDATE: Apollo Group Profit Falls But Beats View; Shares Jump

Apollo Group Inc.'s (APOL) fiscal first-quarter earnings fell 2% as the owner of the University of Phoenix and other for-profit schools reported a sharp decline in new students.

Shares of the Phoenix-based company, however, jumped more 10% in extended trading after reporting better-than-expected per-share earnings, thanks in part to a reduction in shares outstanding and some tuition increases.

Apollo's results come after a rough day for the for-profit college sector. The schools' stocks tumbled broadly, with seven companies declining by double-digit percentages, after Strayer Education Inc. (STRA) announced new-student enrollment for its current winter term had fallen 20% from the prior year.

Monday, Apollo reported that new-student enrollment fell by 42.4%, and overall enrollment declined 3.8% to 438,100 at its flagship University of Phoenix. The company had warned last year that new enrollments could decline by more than 40% in the first fiscal period because of new programs that it was initiating to increase the quality of its student base.

Co-Chief Executive Greg Cappelli said it was still to soon to draw conclusions from the orientation and other strategic initiatives, but "we are pleased with the early results."

Apollo and its peers are facing new regulatory hurdles as the U.S. Department of Education prepares to implement a series of rules related to recruiter compensation, state authorization of programs and a number of other topics.

For the quarter ended Nov. 30, Apollo reported a profit of $235.4 million, down from $240.1 million a year earlier. On a per-share basis, profit rose to $1.61 from $1.54 as the number of shares outstanding decreased 6%. Excluding items such as restructuring costs and a tax benefit, per-share earnings rose to $1.63 from $1.47, above the average analyst estimate of $1.35 on Thomson Reuters.

Revenue rose 5.4% to $1.33 billion, beating the average analyst forecast of $1.26 billion, helped by what the company called "selective" tuition increases at the University of Phoenix.

While earnings and revenue beat Wall Street expectations, William Blair & Co. analyst Brandon Dobell said a bigger issue will be whether the company offers any forward-looking commentary in its conference call, scheduled for later Monday. Investors need to see that "at least [Apollo executives] have some visibility in what's going to happen," Dobell said.

Apollo shares recently jumped 10% in after-hours trading to $39.62. The stock had fallen 5.4% in regular trading Monday and, as of the close, was off 41% over the past 12 months.

-By Melissa Korn and Nathan Becker, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com

Apollo Education Group, Inc. (NASDAQ:APOL)
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