S&P MAINTAINS SELL OPINION ON SHARES OF APOLLO GROUP PT $15
S&P MAINTAINS SELL OPINION ON SHARES OF APOLLO GROUP
6 hours 4 minutes ago - SNPMarketScope
Feb-Q EPS of $0.34, vs. $0.57, both ex-items, beats our forecast by $0.07, as admissions advisory and bad debt expenses were lower than we modeled. However, although we have a favorable view of APOL's current actions to aid operating results through school closings and cost initiatives, we think a very poor public perception of for-profit education will keep demand weak for its programs for an extended period. In that regard, new student counts fell by 20% in the Feb-Q. Our EPS estimates remain $2.50 in FY 13 (Aug.) and $2.05 in FY 14, and our target price stays $15.
In an 8-K filing, APOL said the main accrediting body for its University of Phoenix subsidiary recommended that the University be placed on probation due to noncompliance with accreditation criteria. Specifically, it found the University has insufficient autonomy from its parent company. While probation would put at risk the ability for the University to obtain Federal funding for student loans, APOL intends to appeal the ruling. We see this news as negative, adding to issues around student retention, deteriorating demand for for-profit educators and ongoing regulatory trouble.