UPDATE: J.P. Morgan Reiterates Overweight Rating, Lowers PT on Apollo Group

In a report published Wednesday, J.P. Morgan & Co. reiterated its Overweight rating on Apollo Group APOL, but lowered its price target from $36.00 to $30.00. J.P. Morgan noted, “Tuesday evening, Apollo reported 1QF13 (Nov) EPS of $1.22 (from cont. operations, ex. one-time items), well above our est. of $0.93. The EPS beat was due to much better-than-expected cost controls (in admissions, marketing and G&A) and slightly more favorable enrollment dynamics. APOL's massive optimization initiatives focused on reducing campus footprint and rightsizing the expense base were ahead of schedule in 1QF13, which accounted for some of the EPS beat. Mgmt now expects to realize more than two-thirds of the planned ~$300mln of cost savings during FY2013. That said, mgmt disclosed a broad scale marketing campaign in 2QF13, which could lift 2QF13 marketing expenses by as much as 15% y/y. APOL's modestly lowered FY2013 guidance reflects a combination of these operational changes and a higher level of scholarships in F2013. We appreciate mgmt's commitment to efficiencies, but wish the changes came sooner. We continue to believe that APOL's turnaround strategy will produce tangible benefits over the intermediate term, despite near-term challenges.” Apollo Group closed on Tuesday at $20.94.