Apollo Group Blasts Off on Successful Earnings

Apollo Group

is up big on Monday after posting a successful fiscal 2013 second quarter. The Phoenix, Arizona-based firm's EPS declined over 30 percent to $0.34. However, it nearly doubled analysts' expectations of $0.18 per share. Revenue closed down over 13 percent year-over-year at $834.4 million. Yet, this figure easily topped the Wall Street consensus of around $823 million.

University of Phoenix degreed enrollment declined 15.5 percent year-over-year. The steepest decline was in the associate's degree category at 24 percent. Enrollment for bachelor's, master's and doctoral degrees declined by 11, 12 and 12 percent, respectively. Meanwhile, new degreed enrollment dropped even more. In this respect, enrollment for bachelor's degrees plunged about 24 percent. Total students enrolled in associate's programs dropped 19 percent while enrollment for master's and doctoral degrees declined 11 and 15 percent, respectively. On this note, revenue from new degreed enrollment dropped 15 percent during the quarter.

Apollo's lower student enrollment isn't due to a lack of effort. Despite generating less revenue year-over-year, the company boosted its marketing expenditure from around $159 million to over $173 million - a nine percent increase. Apollo spent nearly 21 percent of its revenue in this regard, up from 16.5 percent in Q2 FY 2012.

On March 22, Apollo's board of directors authorized the repurchase of up to $250 million of stock. There is no expiration to this authorization.

Apollo anticipates full-year revenue to finish in the $3.65 to $3.75 billion range. At the middle-ground of $3.7 billion, it would fall just short of analysts' expectations of $3.73 billion.

According to Apollo's latest SEC filing, on February 22, the University of Phoenix received the Higher Learning Commission (HLC) peer review team's draft report on the ongoing accreditation reaffirmation review of the university. The report concluded that the university is not in compliance with certain administrative structure and governance requirements and recommended that it be placed on probation. If placed on probation, the university's accreditation would be reaffirmed for up to two years. However, it would be required to undergo another comprehensive evaluation during that period. Also, on February 22, Western International University received a similar draft report mentioning it should be placed on probation. These are potentially very important developments, as HLC accreditation provides, among other things, qualification to operate in certain states and participate in Title IV financial aid programs. Note that Apollo generated 91 percent of its consolidated net revenue from Title IV programs in fiscal 2012.

Apollo's successful earnings report has sent the stock soaring to its highest point in the past month. It is hovering around the $18.50 mark as of this writing. Apollo is up over eight percent on Monday.