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Apollo Education rises after lifting 2014 outlook

NEW YORK (AP) -- Shares of Apollo Education Group jumped Wednesday after the for-profit education company raised its 2014 revenue estimate.

THE SPARK: Apollo reported its fiscal first-quarter results after the market closed on Tuesday. Enrollment is still declining, but its adjusted net income was stronger than expected and Apollo raised its estimate for the rest of the fiscal year.

The Phoenix-based company said its adjusted net income declined to $1.04 per share. According to FactSet, that was 14 cents more than analysts expected.

Apollo raised its guidance for revenue, and it is now forecasting $3 billion to $3.1 billion in fiscal 2014, up from its previous estimate of $2.95 billion to $3.05 billion. Analysts were projecting $3.04 billion on average.

THE BIG PICTURE: Apollo Education Group Inc. and other for-profit education companies have reported shrinking enrollments in recent years in response to tighter regulation and the modest economic recovery. The company said enrollment at the University of Phoenix fell 18 percent and new student sign-ups fell 23 percent in its latest quarter, which ended Nov. 30.

THE ANALYSIS: William Blair analyst Timo Connor said the company's enrollment results are still weak, but they are showing some signs of improvement, and said the shares should trade higher because Apollo Education has cut its prices and made some changes to its orientation programs that will improve demand and student retention.

"We continue to believe management is building a leaner and stronger education model," he said. Connor maintained a "Market Perform" rating on the stock.

SHARE ACTION: Apollo Education shares climbed $3.28, or 12 percent, to $30.21 in afternoon trading. Earlier the stock reached an annual high of $31.94, and it has risen 28.6 percent since Oct. 22.