Apollo Group Q3 beats Street, shares up

Thu Jun 30, 2011 4:59pm EDT

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(Reuters) - For-profit education provider Apollo Group's (APOL.O) posted market-beating third-quarter results, as higher tuition fees made up for the drop in student enrollments, and forecast fiscal 2011 revenue largely above Street estimates.

Shares of the company were up 6 percent in after-market trading. They had closed at $43.68 on Thursday on Nasdaq.

Apollo forecast fiscal 2011 consolidated revenue of $4.65-$4.75 billion.

Analysts, on average, were expecting revenue of $4.67 billion, according to Thomson Reuters I/B/E/S.

"We are encouraged by the progress we are making in improving retention rates and continuing to shift the mix of our students toward higher degree-level programs," Apollo Co-Chief Executive Greg Cappelli said.

Market leader Apollo, which runs the University of Phoenix, said new enrollment fell 40.5 percent, while total enrollment fell 16.4 percent.

The company has made changes to its enrollment practices to comply better with new regulatory environment and improve debt repayment rates of its students, which has taken a toll on its student intake.

The U.S. government introduced tougher rules for the sector to make it more accountable for the federal aid it receives to fund student loans. Federal student aid is a primary source of profit at these colleges.

The final education rule published by the U.S. Department of Education early June came out much softer than the draft proposal, reducing the risk of for-profit colleges losing access to federal student aid.

The publication of the final rule also cleared regulatory overhang on the industry.

The drop in enrollments is in sharp contrast to the rapid growth witnessed by Apollo and other for-profit colleges during the recession, when people went back to school to re-skill themselves amid high unemployment rates.

Apollo reported adjusted earnings of $1.45 a share compared with analysts' estimates of $1.33 a share. It forecast fiscal 2011 consolidated revenue of $4.65-$4.75 billion and $4.00-$4.25 billion revenue for fiscal 2012.

(Reporting by Megha Mandavia in Bangalore; Editing by Joyjeet Das)

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