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Capella 3rd-qtr profit drops as enrollments shrink

MINNEAPOLIS (AP) -- Capella Education's third-quarter net income slid 49 percent as the online education company's student enrollments declined 2.1 percent.

The owner of Capella University also predicted fourth-quarter revenue Tuesday that fell short of analyst expectations, as it expects enrollments from October through December to drop 4 to 5 percent. While the company said that it sees signs of stabilization, with new enrollments in the July-September quarter up 10.5 percent, that figure is expected to be flat in the current quarter.

After climbing early in the recession as job-seekers tried to beef up their skills, enrollments have dropped significantly at for-profit schools like Capella. That is in part because the Obama administration enacted new regulations that require schools to meet certain performance targets aimed at making sure students can find jobs and pay off their debt following graduation, or risk losing access to federal student loans. Federal financial aid makes up the bulk of for-profit schools' revenue.

In the July-September quarter, Capella earned $5.1 million, or 39 cents per share, in the July-September quarter. That's down from $9.9 million, or 66 cents per share, during the same period a year earlier.

Analysts expected still-lower earnings of 28 cents per share, according to a FactSet poll.

Revenue fell 3 percent to $99.3 million from $102.3 million. Wall Street's forecast was $98.4 million.

Capella Education Co.'s total enrollments on Sept. 30 came to 34,989.

The Minneapolis company predicts fourth-quarter revenue will fall 3.5 to 4.5 percent, suggesting revenue of $105 million to $106.1 million. Analysts expect revenue of $108.1 million

Capella also expects its profitability to decline as it spends more on "learner success initiatives" and enrollments drop.