ITT Educational Services Inc. will not close any of its campuses in response to plummeting enrollment, but it likely will spend more of its own money to give scholarships to students, company officials said Thursday.
Those disclosures, made during an 11 a.m. conference call with investors, helped erase an 8.5-percent surge the company's stock had enjoyed after the company announced better-than-expected profits earlier Thursday. Instead, ITT's shares plunged, and closed the day at $22.69 each, a drop of 9.6 percent.
Carmel-based ITT is the latest operator of for-profit colleges to report large decreases in student enrollment. The declines sent ITT's profits plunging in the third quarter by 36 percent—although not as much as Wall Street analysts were expecting.
Last week, industry bellwether, Arizona-based Apollo Group Inc., said it plans to cut 800 jobs and close 115 campuses after student enrollment fell 14 percent in its most recent quarter.
ITT has no plans to eliminate campuses but would leave the option on the table, said its Chief Financial Officer Daniel Fitzpatrick, after the company's total enrollment fell by 17 percent in the most recent quarter.
"We will not hesitate to adjust the number of our campuses should it be operationally and financially appropriate to do so," Fitzpatrick told investors and analysts during a conference call Thursday morning.
ITT officials said inquiries at its schools have remained steady, but its rate of converting inquiries into enrollments has slipped. In response, ITT is testing a new communications program that provides an estimate of the number of grants and scholarships for which students would qualify—during their very first visit to an ITT campus. Also, ITT plans to spend more of its own money to fund scholarships for students, said CEO Kevin Modany.
The average cost of an ITT associate's degree program is $45,000, yet scholarships and grants reduce that cost on average to $27,000.
"We are trying to communicate to students that value proposition more clearly," Modany said during the ITT conference call.
In the three months ended Sept. 30, ITT earned $42.9 million, or $1.83 per diluted share. But Wall Street analysts were expecting earnings of just $1.76 per share, according to a survey by Thomson Reuters.
Shares of ITT's stock initially jumped by 8.5 percent on Thursday morning, rising as high as $27.29 per share.
Third-quarter revenue fell nearly 13 percent from a year ago to $315 million. Analysts were expecting $317 million, according to the survey by Thomson Reuters.
Declining dollars are a result of fewer students at ITT’s more than 140 campuses across the country. New student enrollments plummeted nearly 16 percent to 19,300 during the third quarter, compared with the same period a year ago.
ITT’s declines in new student enrollment had been moderating in recent quarters, totaling only 9.5 percent in its second quarter this year.
Most for-profit educators have been suffering similar fortunes. Enrollments have tumbled across the industry, in part because of a natural receding of the wave of students who entered for-profit colleges during the recession that ran from 2007 to 2009.
But more significantly, government investigations of the industry have exposed questionable recruiting practices, sky-high student debt loads and low graduation rates. New rules placed on for-profit colleges by the Obama administration threatened to yank federal student loans for programs whose students failed to pay down their debt loads.
Shares of ITT Educational had been in a nosedive since February, losing 67 percent of their value. The stock closed Wednesday at $25.11.