UPDATE 2-Capella's student sign-ups rise but outlook weak

Tue Oct 23, 2012 9:03am EDT

* Q3 EPS $0.39 vs estimates of $0.28

* Student sign-ups increase 10.5 percent in Q3

* Company forecasts flat sign-ups for Q4

Oct 23 (Reuters) - Capella Education Co's student sign-ups grew for the first time in nearly two years but the company said it does not expect the growth to continue, hinting at a choppy recovery for enrollments at for-profit colleges.

The for-profit education industry has struggled to attract students since a U.S. government scrutiny revealed high student debt loads and low graduation rates.

New federal rules that were put in place last year, weak demand and negative publicity have also hurt enrollments.

Student sign-ups at Capella, which offers mainly online courses, rose 10.5 percent in the quarter ended Sept. 30, after declining for seven straight quarters.

"While we are encouraged that Capella's business is stabilizing, we expect continued quarter-to-quarter volatility," Chief Financial Officer Steve Polacek said in a statement.

The owner of Capella University said student sign-ups for the current quarter will be flat as it expects revenue to decline by 3.5 percent to 4.5 percent, and expenses to rise.

Analysts had expected fourth-quarter revenue to decline 1.8 percent, according to Thomson Reuters I/B/E/S.

The company does not usually provide an earnings forecast but BMO Capital Markets analyst Jeff Silber said the company's revenue forecast implies fourth-quarter earnings of between 68 cents and 74 cents per share.

That is also well below analysts' estimates of 92 cents per share.

Market leader Apollo Group Inc last week said it would cut about 800 jobs and shut down 25 campuses to save costs amid declining profit and lower student enrollments.

Capella's net income fell to $5.1 million, or 39 cents per share, from $9.9 million, or 66 cents per share, a year earlier.

Revenue fell 3 percent to $99.3 million.

Analysts had expected earnings of 28 cents per share on revenue of $98.4 million.

The Minneapolis-based company's shares, which have gained about 20 percent since they last reported results in July, closed at $34.02 on Monday on the Nasdaq.

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