UPDATE: ITT in ‘near-ideal’ environment-WEB ONLY

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A tight job market helped ITT Educational Services Inc. post financial results this morning that would make most public companies envious.

For the period ending Dec. 31, the Carmel-based technical school operator reported fourth quarter revenue of $279.8 million, up from $230.4 million the same period the prior year.

ITT posted a $63 million profit for the quarter, up 30 percent from the year before. Full-year results were even better, with profit increasing nearly 34 percent, to $203 million, on revenue of $1.1 billion.

A 29-percent increase in fourth quarter enrollment, driven by massive layoffs, helped ITT achieve the impressive results, said Alex Paris, an analyst at Barrington Research in Chicago.

“When unemployment rises and job creation falls, enrollment in post-secondary education increases,” he said.

For the year, ITT’s earnings per share amounted to $5.17. Yet, CEO Kevin Modany predicted an even better 2009. ITT’s goal is to increase earnings per share to $6.25 to $6.45, an outlook Paris thinks could be “conservative.”

Besides a gloomy economic forecast for much of the year, President Barack Obama’s stimulus plan includes benefits for the post-secondary education sector. If passed, the proposal includes an additional $2,000 in student-loan limits and $500 in Pell Grant amounts.

More federal-backed money will help students finance their education at lower interest rates than private loans, Paris said, and allow ITT to improve cash flow by providing fewer loans itself.

“The company is operating in a near-ideal environment,” he said.

ITT opened eight new locations in 2008, bringing its total to 105. The company plans to open six to eight additional schools this year. Further, it added 190 degree programs in 2008 and hopes to launch 250 more this year.

ITT’s latest earnings represent quite a turnabout from what the company and other for-profit schools encountered a year ago.

The companies took the worst hit in January 2008, when Virginia-based Sallie Mae, the largest student-loan provider in the country, stopped making loans to students considered subprime borrowers.

Twenty-nine percent of ITT’s $870 million in 2007 revenue came from private student loans, 17 percent of which were classified as subprime. As a result, shares of ITT plummeted in March to a 52-week low of $42.24, miles from its November 2007 peak of $130.

To counter Sallie Mae’s pullout, ITT struck deals with three lenders to provide private loans – Bank of America, Chase Education Finance and Citibank. ITT also said it would provide loans itself to fill the potential funding gap after students secure federal aid and borrow from the new lenders.

ITT’s actions have helped its stock rebound. Shares opened this morning at $114.55 and were trading at $128.50 around midday.

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