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ITT shares plunge on competitor's enrollment woes

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Shares of Carmel-based ITT Educational Services Inc. fell as much as 6.8 percent Tuesday morning after the largest player in its industry reported a 45-percent plunge in new-student enrollment.

Apollo Group Inc., operator of the University of Phoenix, the biggest U.S. for-profit college, is suffering enrollment declines because it now allows students to try its courses before signing up.

Apollo made that change in response to new federal “gainful employment” rules that threaten to restrict or end federal student loans at for-profit colleges that have too many former students not paying down their debts.

Since the U.S. Department of Education released data in July showing how the new rules would affect individual colleges, stocks of for-profit educators have suffered.

ITT stock fell $4.84 per share Tuesday morning, to $65.83, before rebounding slightly. Even before Tuesday’s drop, shares of ITT Educational had fallen 22 percent since July.

ITT Educational will report its first-quarter financial results on April 21.

Apollo suffered a net loss of 45 cents a share in the fiscal second quarter ended Feb. 28, compared with a profit of $92.6 million, or 60 cents a share, a year earlier, Phoenix-based Apollo announced Tuesday.

Apollo shares fell as much as 10 percent in morning trading on the NASDAQ stock index. The shares are down 33 percent in the past 12 months.

Enrollment at the University of Phoenix is likely to decline throughout this year as the college allows students to try its courses before signing up, Apollo Chief Financial Officer Brian Swartz said in January.

The increased effort to attract students is driving up Apollo’s marketing costs, said Ariel Sokol, a UBS AG analyst in New York.

“The amount that Apollo pays to put a new student in one of its classrooms has almost doubled over the past year, to about $3,200,” Sokol said in an interview before the results were released. “Declining new enrollment and higher marketing costs are both hurting Apollo’s net income.”

The 45-percent decline in new student enrollment at the University of Phoenix brought the figure to 48,200, Apollo said in the statement.

Revenue fell 2 percent, to $1.05 billion.

The results included about $222 million in charges related to goodwill, legal costs and other items, the company disclosed. Without the charges, income was $118.2 million, or 83 cents per share. The average prediction by 19 analysts surveyed by Bloomberg was 69 cents a share.

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  • Good Points from Everyone
    I think everyone makes a good point. The one thing I will say is that until you go through the interview process at ITT, then you can make a factual statement. The company is very compliance driven and explains up front what a student should expect. Most of the students that attend ITT or similar schools do not want traditional school and the generalized classes. The hands-on type classes offered make it easier for some to learn.

    Like any educational system you will not find perfection anywhere. I have interviewed and hired people for years and have found too many traditional college grads that are not prepared for the job market and that have held jobs nowhere close to what their major was. So good or bad, ITT and similar type schools supply valuable technical employees across the country which is a plus in our high-tech world.
  • ITT was great for me
    I graduated from ITT in 1976, got a very nice career-starting job upon graduation, and have had very good run for over thirty years. I have earned six-figure incomes for the last several years. My instructors were very qualified and large companies came on campus (the old on 38th St.) to interview. My loan was paid on time, by the way.
  • Corperate Welfare
    Recently read where student loan burden/debt is higher for students of for-profit schools than even public and private colleges. Good for the Federal Government for putting a limit on this waste. Go to Ivy Tech and get an education and less debt.
  • NY Times Article
    The NY Times earlier this month had an expansive article about the huge debt loads that students who enroll at for profit colleges are graduating with along with subpar skill sets. ITT is mentioned in the article:

    http://www.nytimes.com/2010/03/14/business/14schools.html
  • Sorry, Cindy
    I'm afraid I must agree with Sarah; UOP and ITT are two of the worst offenders with student loan debt and unmarketable skills. The majority of persons who call in to Sallie Mae to complain about being unable to pay back their debt are from the latter. Students do not know what they are signing when registering for "financial aid." They think they are obtaining an education with a secure job offer upon graduation; what they are getting is a certificate or degree from a school that is not commendable or accredited, and credits/classes that cannot be transferred to another college (so if you plan on turning that Associate's degree into a Bachelor's, you will have to start from scratch). There is absolutely no guarantee for a job, either. UOP would not have the reputation they carry otherwise.
  • Know the facts Sarah
    First of all my husband is a UOP graduate and son an ITT graduate and both did very well after graduation. Granted, there are always some bad actors in business but ITT has a great track record of employment for their students. Your comments about not having marketable skills are way off. Do some research before you make these type of comments. Like everyone in this country, you are entitled to an opinion but hopefully you will do so in the future based on facts not emotions.
  • They have been riding this student debt too long
    Phoenix and ITT are two of the biggest national offenders of tricking people into expensive, long term contracts while providing no education that will enable the students to pay off massive loans to attend. I have personally interceded for employees who thought they were attending real colleges that would help them get ahead. The contracts charge more than full scale universities and provide no marketable skills. I don't typically like government interfering in business - but these are scams that prey on those who most need education yet are least able to discern the best route.

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