Apollo Education Falls Despite Q3 Earnings Beat, Lags Sales - Analyst Blog
Share price of Apollo Education Group, Inc. APOL declined almost 7% in afterhours trading as the post-secondary education provider reported lower-than-expected top line numbers in the third quarter of fiscal 2015 and reduced its fiscal 2015 guidance for the third time this year.
Adjusted earnings of 53 cents per share in the third quarter of fiscal 2015 surpassed the Zacks Consensus Estimate of 47 cents per share by 12.8%. However, earnings were down 32% from 78 cents reported in the year-ago quarter, owing to weakness in revenues.
Apollo Education Group Inc. - Earnings Surprise | FindTheBest
Net revenue of $681.5 million lagged the Zacks Consensus Estimate of $699 million by 2.5% and also fell short of the company’s expected range of $690 million to $705 million. Revenues declined 14% from the prior-year quarter owing to lower retention rates and lower-than-expected new enrollments.
Adjusted operating income came in at $101.6 million, lower than $140.3 million in the prior year quarter. However, operating income exceeded the company’s expected range of $85 million to $95 million owing to cost control.
Revenue per student declined 4.6% year over year.
Segment Details
University of Phoenix (UOP) revenues declined 17.7% year over year to $560.7 million due to a 14.5% decline in total enrollment to 206,900. New enrollment or starts at the UOP declined 13.3% year over year to 29,400.
UOP’s enrollments have been sluggish for many quarters due to regulatory challenges and changes and competition in the higher education industry.
Apollo Global reported net revenue of $109.6 million, up 9.1% year over year. The segment has been benefiting from revenues from Open Colleges and Milpark acquisitions and improved enrollment trends in the international markets.
The Other Schools segment reported revenues of $11.2 million in the third quarter of fiscal 2015, down 1.8% year over year.
Fourth Quarter Fiscal 2015 Outlook
Management expects fourth-quarter fiscal 2015 total enrollment to be the same as third quarter 2015. Revenue per student is expected to be flat year over year.
Fiscal 2015 Guidance Lowered
Based on the business trends in the third quarter of fiscal 2015 and lower retention rates and enrollment trends expected in the upcoming quarter, Apollo Education Group cut its revenue and adjusted operating income guidance for fiscal 2015 for the third time this year.
Management expects fiscal 2015 revenues in the range of $2.60 billion to $2.62 billion much lower than the prior expectation of $2.63 billion to $2.68 billion, and representing a decline from fiscal 2014 levels. Adjusted operating income is expected to range between $190 to $200 million, lower than the prior expectation of $200 million and $230 million. The company expects UOP to end fiscal 2015 with about 195,000 to 200,000 students.
Apollo Education Group carries a Zacks Rank #4 (Sell).
However, better-ranked stocks in the education industry include Universal Technical Institute, Inc. UTI, Bright Horizons Family Solutions, Inc. BFAM and Grand Canyon Education, Inc. LOPE. While Universal Technical Institute sports a Zacks Rank #1 (Strong Buy), Grand Canyon Education and Bright Horizons Family hold a Zacks Rank #2 (Buy).
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