Why Apollo Group's Shares Soared
Jun 26th 2012 5:05PM
Updated Jun 26th 2012 5:12PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of University of Phoenix parent Apollo Group (NAS: APOL) were moving to the head of the class today, gaining as much as 11% in intraday trading after the company announced fiscal third-quarter results.
So what: Here's a good sign that things haven't been going well for Apollo: In the third-quarter "highlights," the company presented revenue and profit totals, but without any comparison with the year-ago results. For the quarter, the trend continued as it has for a while now, with revenue dropping 9% from a year ago and diluted earnings per share slipping 25%. Degree enrollment was down 13% year over year to 346,300.
But as is so often the case, the more important question was how Apollo performed versus the market's expectations. On that report card, it passed with flying colors. Adjusted per-share profit of $1.20 was well ahead of the $0.97 Wall Street was looking for. Meanwhile, the company boosted its full-year operating-profit outlook to a range of $700 million to $740 million from a previous range of $625 million to $725 million.
Now what: The trend has not been Apollo's friend in recent years. Regulators have been bearing down on the industry, and students have been increasingly wary of taking on debt to go back to school. It'd be hard to call this quarter's results a turning point, but with shares down significantly year to date, investors may be perfectly happy with a slowing of the decline.
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