August 5, 2010 / 1:40 PM / 7 years ago

UPDATE 2-Lincoln Educational cuts FY outlook; shares fall

* Cuts FY EPS view to $2.40-2.50 from $2.50-$2.60

* Cuts FY rev view to $645-$650 mln from $650-$655 mln

* Q2 EPS $0.50 vs est $0.44

* Revenue $152.8 mln vs est $153.1 mln

* Shares touch 52-week low (Recasts; adds conference call details, updates share movement)

BANGALORE, Aug 5 (Reuters) - For-profit education provider Lincoln Educational Services Corp (LINC.O) cut its outlook for the full year, citing uncertainty in the current regulatory environment, sending its shares down 17 percent to a 52-week low.

Shares of the West Orange, New Jersey-based company, which posted a better-than-expected quarterly profit, touched a low of $17.12 before recouping some losses and trading down 15 percent at $17.50 Thursday afternoon on Nasdaq.

For-profit education companies, including Lincoln, Apollo Group APOL.O and DeVry DV.N, could soon have to prove that their former students are either paying off their loans or are capable of doing so, under proposals being considered by the Department of Education.

“The current regulatory environment has created uncertainty in our sector as the Department of Education has placed a greater emphasis on regulating quality outcomes, student debt levels and overall return on educational investment,” the company said in a statement.

Programs would lose their federal funding eligibility if more than 65 percent of former students failed to pay the principal on federal loans, and if their graduates’ debt was more than 30 percent of discretionary income and 12 percent of total income. [ID:nN22158531]

Lincoln, which expects student starts to remain essentially flat for the remainder of 2010, said its actions to reduce the percentage of higher risk students in its enrollment and to raise student outcomes contributed to the lowered outlook.

    The company cut its earnings outlook by 10 cents a share to $2.40 to $2.50 per share. It cut its revenue outlook by $5 million to a range of $645 million to $650 million.

    “There will be trade offs in the short term. Our new student start growth will be limited by the actions we are taking to raise our student outcomes,” Executive Chairman David Carney said on a conference call with analysts.

    The company also saw an increased number of students who enrolled but did not start their programs due to financial hardships in the second quarter, and it expects the trend to continue in the current and fourth quarters.

    Lincoln, which offers diploma and degree courses in the areas such as health sciences, business and information technology, and hospitality services, said second-quarter net income rose to $13.2 million, or 50 cents a share, from $7.4 million, or 27 cents a share, a year ago.

    Revenue rose 19 percent to $152.8 million. Average student population rose about 18 percent.

    Analysts on average were expecting the company, which also competes with Corinthian Colleges COCO.O and ITT Educational Services ESI.N, to earn 44 cents a share on revenue of $153.1 million, according to Thomson Reuters I/B/E/S. (Reporting by Megha Mandavia in Bangalore; Editing by Anne Pallivathuckal)

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