Market Overview

Apollo Group to Close 115 University of Phoenix Locations

Apollo Group to Close 115 University of Phoenix Locations

After reporting that fourth quarter revenues dropped an astounding 60 percent, Apollo Group (NASDAQ: APOL) has announced that it will be closing 115 University of Phoenix locations due to declined enrollments and higher costs. Shares of APOL traded down more than 10 percent pre-market.

This change will affect about 13,000 out of 328,000 students, and will see 25 campuses and 90 satellite centers close, meaning that 30 states will see at least one center shut down.

President Bill Pepicello stated that students will have the option to still enroll and take courses online (about four percent of the student body will be affected) and will leave the organization with 112 locations in 36 states, including Puerto Rico and the District of Columbia.

One reason that will assist in easing the closure pain is that students are favoring online courses over visiting physical locations. Convenience is likely the key (weather-permitting, traffic and illness are several factors affecting school site attendance) and without the higher costs, University of Phoenix instituted a tuition freeze in efforts to retain students.

Peak enrollment was over 400,000 for the for-profit business and has subsequently fallen 13.8 percent as reported with the company's earnings, which came in at $0.52 EPS versus $0.49 estimates, while revenues declined to $996.5 million versus the expected $1.01 billion.

The declines, revenue miss and closings caused a downgrade of the stock by Bank of America on Wednesday morning from Buy to Neutral and a lowered price objective from $40 to $28 per share. Analysts at Bank of America stated that, " Apollo remains in a period of significant transition as it faces continued new student start declines, an increasingly competitive environment and more price sensitive students. Apollo is not standing still. It is increasing its career focus and aligning itself with corporations. It froze tuition for incoming students & announced cost cutting initiatives which should generate >$300mn (8% of costs) in savings over the next two years. We are pleased to see the action."

So, some positive sentiment arises from the cost-cutting efforts, but analysts are hesitant to recommend shares despite recent weakness.

Pre-market, shares were down 11.79 percent after closing flat on Tuesday. Year to date, shares of Apollo Group are down 48.97 percent.

Posted-In: Bank of AmericaEarnings News Topics Economics Analyst Ratings Movers General Best of Benzinga


Related Articles (APOL)

View Comments and Join the Discussion!

Partner Center