CARMEL, Ind. (AP) -- ITT Educational Services saw net income plunge 42 percent during the second quarter, extending a pattern in the for-profit college sector where student enrollment has evaporated under stricter federal regulation that hold companies more accountable for graduation rates and job placement.
Stocks across the sector slumped earlier this week as the first earnings reports rolled out, revealing that enrollments, revenue and profits are in decline. They fell further Thursday.
Shares in ITT Educational Services Inc. fell 8 percent, or $4.10, to $46.33 in afternoon trading. They have lost half their value from a year ago and at one point Thursday, touched a 52-week low of $39.52.
The company said net income for the April-through-June period was $46 million, or $1.96 per share, down from $79 million, or $2.85 per share, in the second quarter of 2011.
Revenue declined 15 percent to $329.8 million from $387.9 million.
Analysts polled by FactSet were looking for earnings of $2.17 per share and revenue of $338 million.
The company said new student enrollment in the second quarter decreased 9.5 percent to 15,698, down from 17,351 in the same period a year ago. Total student enrollment sank 15.7 percent to 66,397 as of June 30, down from 78,743 a year earlier.
Citi analyst James Samford said in a note to investors that the enrollment drop was worse than expected. He also cited its operating margin decrease in an environment of declining revenue as a concern.
ITT, based in Carmel, Ind., offers degrees in subjects such as computer programing and web development through its ITT Technical Institutes and Daniel Webster Colleges. The industry saw enrollment rise during the recession as unemployment rose and people sought new skills to improve their job prospects. Taking its toll on the industry are the regulatory changes and also criticism, much of it from congress, that the schools were leaving ill-prepared students with slim odds of finding a job and as such, paying off huge college loans.
Under new rules, colleges must meet certain performance criteria or risk losing access to federal student loans. A number of for-profit education companies have stiffened enrollment guidelines, and that has cut into enrollment and profitability.