(Reuters) - Apollo Group Inc APOL.O expects student sign-ups to fall for another quarter and said it would cut costs, indicating that the embattled U.S. for-profit education industry’s woes were far from over.
The warning took some of the shine off the company’s better-than-expected profit and a raised full-year outlook. Shares rose as much as 9 percent in extended trading on the results but pared early gains to trade up 4 percent.
Apollo executives said on a conference call that they did not have enough visibility to predict when the company, which owns the University of Phoenix, could return to growth.
“While we are refraining from providing a specific year-over-year change estimate, our objective is to return to new enrollment growth at some point in 2013,” Apollo Chief Financial Officer Brian Swartz said on the call.
The for-profit education industry has struggled to attract students ever since a U.S. government scrutiny revealed high student debt loads and low graduation rates.
Colleges tightened their admission standards to comply with tough rules that followed, a move that led to huge declines in student sign-ups. A few quarters ago, Apollo’s enrollment fell over 40 percent.
Apollo, seen as a bellwether for the sector, said it was evaluating opportunities to optimize its cost structure and increase cash flow for the long term.
The savings from these measures will be seen in the year ending August 2013, but will mostly be felt in 2014.
“Investors should be aware that enrollment trends will continue to be quite volatile for Apollo as visibility is obviously not clear,” Barrington Research analyst Alexander Paris wrote in a preview note on issued on Friday.
Apollo reported an 8 percent decline in student sign-ups for the May quarter.
That is lower than the declines the company had forecast earlier but is a contrast to the growth in the past two quarters.
Apollo’s third-quarter results indicate that enrollment trends improved in April and May.
BMO Capital Markets analyst Jeff Silber said he expects student sign-ups to increase from late 2012 or early 2013.
“While we see no near-term catalyst to get (new student enrolments) moving in the right direction, we are cautiously optimistic that the rates of declines will continue to get less worse,” Jeff Silber said in a preview note on Monday.
On Monday, Apollo raised its full-year revenue forecast to $4.2 billion to $4.3 billion and adjusted operating income to $700 million to $740 million.
Third-quarter profit fell to $134.4 million, or $1.13 per share, compared with $213.3 million, or $1.51 per share, a year earlier.
Excluding one-time items, Apollo earned $1.20 per share. Revenue fell 9 percent to $1.13 billion.
Analysts expected earnings of 97 cents per share on revenue of $1.12 billion, according to Thomson Reuters I/B/E/S.
Phoenix, Arizona-based Apollo’s shares, which have fallen more than 30 percent so far this year, closed at $32.47 on Monday on the Nasdaq.
Reporting by A. Ananthalakshmi in Bangalore; Editing by Supriya Kurane and Saumyadeb Chakrabarty