Apollo Beats, Revises 2012 Outlook - Analyst Blog
October 19 2011 - 10:42AM
Zacks
Apollo Group Inc. (APOL), one of the world’s
largest private education providers, reported earnings of $1.02 per
share excluding one-time items for fourth-quarter 2011, down 22.1%
from the prior-period earnings of $1.31. However, earnings
surpassed the Zacks Consensus Estimate of 93 cents a share.
On a reported basis, including one-time items, earnings came in
at $1.37 a share compared with earnings per share of 32 cents in
the prior-year quarter.
Apollo delivered total revenue of $1,122.1 million during the
quarter, down 10.9% from the year-ago quarter attributable to lower
enrollments at University of Phoenix, partially offset by selective
tuition price increases and better student retention rates.
Degreed Enrolment at University of Phoenix dropped 19.1% to
380,800 primarily due to a drop of 33.5% in New Degreed Enrollment.
However, total revenue surpassed the Zacks Consensus Estimate of
$1,098.0 million.
The company believes that operational initiatives implemented to
support students and improve educational outcome will result in a
decline in New Degreed Enrolment.
Instructional and student advisory cost decreased to $438.5
million during the quarter from $445.3 million in the year-ago
quarter, primarily due to reduction in faculty costs driven by
lower enrolments at University of Phoenix and Apollo Global.
However, the benefits were partially offset by the company’s
continuous effort to invest so as to improve students’ educational
outcome. This, however, resulted in higher compensation.
A reduction in interest expenses led to a decline in marketing
expenses by 4.6% to $171.0 million from the prior period. Admission
advisory expenses declined by 14.7% to $99.4 million compared with
the prior-period figure, primarily due to lower admissions advisory
headcounts, partially offset by increased employee compensation
costs.
Apollo’s bad debt expenses for University of Phoenix decreased
by $34.4 million during the quarter to $39.6 million. As a
percentage of revenue, it came in at 3.5%, representing a decrease
of 240 basis points from 5.9% reported in the prior-year quarter. A
decrease in gross accounts receivable attributable to
implementation of university orientation coupled with a fall in New
Degreed Enrollment and improvement in student retention rates led
to a decline in bad debt expense.
Operating income for the quarter came in at $230.7 million
compared with an operating income of $142.4 million a year ago.
Operating margin expanded 930 basis points to 20.6%.
Financial Position
Apollo ended the quarter with cash and cash equivalents of
$1,571.7 million compared with $1,284.8 million as of August 31,
2010. The increase in cash was primarily attributable to the cash
generated from operations, proceeds from sale of office building in
Phoenix and decline in restricted cash, partially offset by
increased capital expenditure, and share buybacks made by the
company.
Apollo repurchased $357.0 million worth of shares and ended the
quarter with shareholders’ equity of $1,240.4 million. At the end
of the quarter, the company was left with approximately $0.7
million under its current share repurchase authorization.
Currently, the board of directors of the company increased the
current share repurchase authorization to $500.0 million. Long-term
debt stood at $179.7 million compared with $168.0 million in the
prior-year period.
Guidance
The company expects net revenue in the range of $4.10–$4.20
billion in fiscal 2012 instead of $4.00 - $4.25 billion forecasted
earlier. However, Apollo has lowered and narrowed its fiscal 2012
operating income expectation to $655.0 - $780.0 million.
Competition
Apollo Group faces intense competition from other companies
offering postsecondary education, such as DeVry
Inc. (DV), Strayer Education Inc. (STRA)
and Career Education Corp. (CECO).
Apollo retains a Zacks #3 Rank, which translates into a
short-term Hold rating. Our long-term recommendation on the stock
remains Neutral.
APOLLO GROUP (APOL): Free Stock Analysis Report
CAREER EDU CORP (CECO): Free Stock Analysis Report
DEVRY INC (DV): Free Stock Analysis Report
STRAYER EDUC (STRA): Free Stock Analysis Report
Zacks Investment Research
CECO Environmental (NASDAQ:CECO)
Historical Stock Chart
From May 2024 to Jun 2024
CECO Environmental (NASDAQ:CECO)
Historical Stock Chart
From Jun 2023 to Jun 2024