PHOENIX (AP) — Shares of the Apollo Group Inc., the nation's largest for-profit college chain, surged Friday after the company's third-quarter profit exceeded Wall Street estimates by about 9 percent.
THE SPARK: The owner of University of Phoenix and other schools posted on Thursday earnings adjusted for one-time legal charges of $1.45 per share, ahead of the expectation of analysts surveyed by FactSet of $1.33.
THE BIG PICTURE: Phoenix-based Apollo exceeded expectations as its expenses for unpaid student loans fell and stock buybacks. The company is seeing enrollment fall and expects the trend to continue through 2012, but students already enrolled are staying, improving retention rates. The company also is bringing in more money per student as revenue shifts more toward higher-degree programs.
THE ANALYSIS: Sterne Agee analyst Arvind Bhatia raised the 2011 revenue estimate to $4.70 billion from $4.65 billion and the earnings estimate to $4.88 from $4.72. The 2012 estimates were also boosted to $4.17 billion from $4.09 billion for revenue and to $3.22 from $3.14 for earnings. The rating remains "Neutral."
FBR Capital Markets analyst Michael Tarkan boosted his price target to $47 from $45, saying the company's long-term outlook is more positive. He maintained a "Market Perform" rating.
Robert W. Baird & Co. analyst Amy W. Junker kept her "Neutral" rating and price target of $48. She said she's waiting to see evidence that the company's fundamentals have bottomed out. That bottom could be a few quarters away, she said.
SHARE ACTION: Apollo Group shares rose $2.91, or 6.7 percent, to $46.59 at midday. They have traded between $33.75 and $53.61 in the past 52 weeks.
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