Shares in For-Profit Education Companies Fall Sharply

Shares in the for-profit education companies Career Education and the Apollo Group have fallen sharply in the last week – 19% and 16% respectively amid worries over enrollment falls and political pressure.

Matt Koppenheffer at The Motley Fool reports on how revenue for Career Education’s fourth-quarter fell 17% from last year, to $440 million, while an operating profit of $18 million in the prior year was reversed to a $169 million operating loss.

Meanwhile, the Apollo Group – parent company of the University of Phoenix – has announced that it will report a dip in enrollment after adjusting for an extra day in the second fiscal quarter of 2012.

While the company had expected an enrollment growth in that period, it has actually recorded an enrollment decrease “in the low to mid-single digits.”

Koppenheffer reports that the company is set to keep its revenue guidance for fiscal 2012 the same, despite lowering its operating profit guidance to a range of $625 million to $725 million – 4% down from what it originally forecast.

Despite the alarming 16% drop, experts say that a 4% drop in its earnings revision isn’t the end of the world. However, as the entire for-profit education sector is under more federal pressure and as new enrollment look to fall by almost a quarter, the future is looking tough.

The market is thought to be reacting to the news that the government is set to crack down on questionable practices within the for-profit education sector, with almost 90 percent of federal funding at risk of being cut.

The road ahead will be a tough one for Career Education, predicts Koppenheffer.

“That’s reflected in the big drop in financial results as well as the 14% dip in student population.

“However, it may be even more evident in the fact new student starts — which provide a peek into future results — fell 24% from 2010.”