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Wall Street Still Positive On Apollo Group

By    |   Wednesday, 09 Nov 2011 03:14 PM

For-profit higher education provider Apollo Group (APOL) has been pushed into recruiting changes by government reports, resulting in currently lower revenues. While the current numbers are down, several Wall Street analysts remain positive on this stock.

Apollo Group is best known for its for-profit University of Phoenix. The company is the largest private provider of educational services and provides undergraduate, master's and doctoral level degrees through on-campus and online programs.

For the company's 2011 fiscal year ended Aug. 31, revenues were $4.73 billion, down from $4.93 billion in 2010. Adjusted income from continuing operations was $4.94 per share, down from $5.35.

In the fourth quarter, adjusted net income came in at $1.02, down from $1.31. Lower revenue and profit results were due to a 19 percent decrease in enrolled students and a 33 percent decrease in new enrollments.

Federal investigation

In 2010, reports from the General Accounting Office of the U.S. government stated that for-profit higher education companies were using misleading sales tactics to increase enrollments and guaranteed student loan applications.

Although the results of some of the GAO studies were later disputed, for-profit education companies such as Apollo Group were forced to significantly change their enrollment policies, providing potential students with more information on the costs and the expectations of working toward and receiving a degree. In every news release the Apollo Group now mentions their "student-centric approach to admissions."

The result of lower admissions and enrolled student levels is expected to be even more dramatic for the 2010 fiscal year. Revenues are forecast to decline by 10 percent, and the consensus earnings estimate for the year is $3.33 per share, off a third from 2011.

In spite of declining enrollment, revenue and profits, the APOL share price has recovered from the mid-2010 low of under $35 per share. Positives are a growing pile of cash, at $1.57 billion at the end of fiscal 2011, prospects for growth in the international arena and stronger expense controls.

Citigroup analysts recently reiterated their neutral rating and raising the target price by $5. Credit Suisse analysts have an outperform rating on APOL and also recently increased their share target price.

The company next reports on Jan. 9.

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For-profit higher education provider Apollo Group (APOL) has been pushed into recruiting changes by government reports, resulting in currently lower revenues. While the current numbers are down, several Wall Street analysts remain positive on this stock. Apollo Group is...
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2011-14-09
Wednesday, 09 Nov 2011 03:14 PM
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