24/7 Wall St. » COCO

24/7 Wall St. Closing Bell (C, NEM, STX, XOM, MWW, AMZN, BRCM, AET, COCO, EPD, MAN, MPC, NOC, WHR, KTCC, SGMO, MDVN, JDAS, IXYS)

Paul Ausick — Wed, 01 Feb 2012 21:04:57 +0000

The three major US stock indexes opened higher this morning, following on a positive debt sale by Portugal and some improvement in PMI numbers from Europe. ADP employment data did not meet expectations, but did not pull stocks down. ISM data fell a bit short of expectations, but construction spending rose sharply. In Asia, China posted mixed PMI reports and the country’s data on new loans was lower than expected. US oil and gasoline inventories rose more than expected, put a crimp in energy prices that had started our higher for the day (more coverage here). WTI crude finished the day down -0.9% at $97.61/barrel, its lowest level in six weeks. Brent crude rose 0.71% to $111.77/barrel. Gold closed up 0.41% at $1,747.60.

The unofficial closing bells put the DJIA up more than 83 points to 12,716.31 (0.66%), the NASDAQ rose more than 34 points (1.22%) to 2,848.27, and the S&P 500 rose 0.89% or nearly 12 points to 1,324.08.

There were several analyst upgrades and downgrades today, including Citigroup Inc. (NYSE: C) raised to ‘outperform’ at Wells Fargo; Newmont Mining Corp. (NYSE: NEM) cut to ‘hold’ at Stifel Nicolaus; Seagate Technology PLC (NASDAQ: STX) raised to ‘buy’ at Stifel Nicolaus; Exxon Mobil Corp. (NYSE: XOM) cut to ‘hold’ at Argus (see our coverage here); and Monster Worldwide Inc. (NYSE: MWW) cut to ‘perform at Oppenheimer. Amazon.com (NASDAQ: AMZN) had three ratings changes today: maintained as ‘neutral’ with target price cut to $190 at Credit Suisse; maintained ‘outperform’ but estimates cut at Baird; and target price lowered to $225 at Jefferies.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Amazon.com is down -8.2% at $178.51; Broadcom Corp. (NASDAQ: BRCM) is up 8.24% at $37.18; Aetna Inc. (NYSE: AET) is up 3.3% at $45.13; Corinthian Colleges Inc. (NASDAQ: COCO) is up nearly 34% at $4.05; Enterprise Products Partners L.P. (NYSE: EPD) is up 3.8% at $50.13, after posting a new 52-week high of $50.35 earlier today; Manpower Inc. (NYSE: MAN) is up nearly 14% at $45.70; Marathon Petroleum Corp. (NYSE: MPC) is up nearly 10% at $41.98; Northrup Grumman Corp. (NYSE: NOC) is up 2.22% at $59.34; and Whirlpool Corp. (NYSE: WHR) is up 14% at $61.93.

Other standouts from today include the following stocks:

Key Tronic Corp. (NASDAQ: KTCC) is up nearly 37% at $8.53, after posting a new 52-week high of $8.74 earlier today. The computer peripherals maker posted better-than-expected earnings and revenues after markets closed last night.

Sangamo BioSciences Inc. (NASDAQ: SGMO) is up more than 21% at $4.19. The pharmaceutical maker has announced a collaboration with Shire plc (NASDAQ: SHPGY) to develop a hemophilia treatment.

Medivation Inc. (NASDAQ: MDVN) is up more than 21% at $67.26, after posting a new 52-week high of $70.87 earlier today. The development stage drug maker has reported highly positive results on a test of its late-stage prostate cancer treatment. We have more coverage here.

JDA Software Group Inc. (NASDAQ: JDAS) is down more than -17% at $24.39. The software maker issued a fairly weak quarterly report and continuing investor wariness remains over an SEC investigation of the company’s accounting practices.

IXYS Corp. (NASDAQ: IXYS) is down more than 14% at $11.76. The integrated circuit maker posted poor quarterly numbers after markets closed last night.

Stay tuned for Thursday. Federal Reserve chairman Ben Bernanke is speaking at 10:00 a.m. and Dallas Fed president Richard Fisher is speaking in the evening. We have noted the following events on the schedule (all times Eastern):

7:30 a.m. – Challenger Job-cut data
8:30 a.m. – New claims for unemployment benefits
10:30 a.m. – EIA weekly natural gas storage report
4:30 p.m. – Federal Reserve money supply and balance sheet reports

Paul Ausick

Filed under: 24/7 Wall St. Wire Tagged: AET, AMZN, BRCM, C, COCO, EPD, IXYS, JDAS, KTCC, MAN, MDVN, MPC, MWW, NEM, NOC, SGMO, STX, WHR, XOM

Morning Movers (COCO, KTCC, STX, IXYS, HA)

Paul Ausick — Wed, 01 Feb 2012 15:19:57 +0000

There are several stocks trading more heavily than usual this morning, and also experiencing large gains or drops in share prices. These include Corinthian Colleges Inc. (NASDAQ: COCO), Key Tronic Corp. (NASDAQ: KTCC), Seagate Technology PLC (NASDAQ: STX), IXYS Corp. (NASDAQ: IXYS), and Hawaiian Holdings Inc. (NASDAQ: HA).

After the first half hour of trading this morning, Corinthian is up more than 27% at $3.86. Volume is already more than double the daily average of about 1.4 million shares traded. The for-profit education company reported reported better-than-expected profits and revenues and forecast third quarter earnings above analysts’ estimates.

Key Tronic is up more than 24% at $7.76 after posting a new 52-week high of $8.10 earlier. Volume is already about 7x the daily average of about 36,000 shares traded. The computer peripherals maker posted better-than-expected earnings and revenues after markets closed last night.

Seagate is up nearly 16% at $24.47 after posting a new 52-week high of $24.71 earlier. Volume is nearly double the daily average of about 10.4 million shares traded. The disk drive maker posted a jump of 3x in net income last night.

IXYS is down nearly -19% at $11.14. Volume is already 50% higher than the daily average of about 99,000 shares traded. The integrated circuit maker posted poor quarterly numbers after markets closed last night.

Hawaiian, parent of Hawaiian Air, is down nearly -12% at $6.15. Volume is already higher than the daily average of about 549,000 shares traded. The airline company posted mixed results for the quarter last night, including a sharp drop year-over-year in EPS.

The DJIA is up 1.09% at about 12,771, the Nasdaq Composite is up 0.71% at about 2,834, and the S&P 500 is up 1.02% at about 1,326.

Paul Ausick

Filed under: 24/7 Wall St. Wire Tagged: COCO, HA, IXYS, KTCC, STX

Expected Price Gains at For-Profit Education Companies (APOL, EDMC, APEI, STRA, DV, WPO, COCO, BPI, LOPE, CECO)

Paul Ausick — Tue, 01 Nov 2011 20:06:57 +0000

Share prices at for-profit education companies peaked in June and July this year, following a slow start. At the beginning of the year there was widespread fear that new federal rules related to student loans, recruiting practices and employment upon graduation would eviscerate revenues and earnings. However, the rules changes were less onerous than anticipated, and stock prices gradually climbed back up. Enrollments are still a problem at some schools, but share prices are well above lows at most of the companies.

The ten companies we have looked at are Apollo Group (NASDAQ: APOL), Education Management (NASDAQ: EDMC), American Public Education (NASDAQ: APEI), Strayhorn Education (NASDAQ: STRA), DeVry (NYSE: DV), Washington Post (NYSE: WPO), Corinthian Colleges (NASDAQ: COCO), Bridgeport Education (NYSE: BPI), Grand Canyon Education (NASDAQ: LOPE), and Career Education (NASDAQ: CECO).

All data is from Yahoo! Finance, and current share prices were gathered in the mid-afternoon today.

Apollo Group has a median target price of $53.00 from 15 brokers. Shares are trading today at $46.09, for an implied gain of $6.91, or 15%. Apollo’s forward P/E is 12.72 and the company does not pay a dividend. The stock’s 52-week trading range is $33.75 to $54.23, and at today’s price that is about 37% above its 52-week low and 15% below the 52-week high. The company reported better-than-expected quarterly earnings a couple of weeks ago and jumped more than 10% in a day. But lower enrollments plague the company, which has managed to keep revenue up by raising tuition and fees.

Education Management has a median target price of $20.00 from 11 brokers. Shares are trading today at $20.48, about 0.5% above the target price. Education Management’s forward P/E is 13.36 and the company does not pay a dividend. The stock’s 52-week trading range is $11.56 to $28.61. At today’s price it is about 77% above its 52-week low and 28% below the 52-week high. The company beat both quarterly EPS and revenue estimates when it reported earnings last week. But a warning on future enrollment and profit declines have cooled enthusiasm for the shares.

American Public Education has a median target price of $45.00 from 10 brokers. Shares are trading today at $35.11, for an implied gain of $9.89, or 28%. APEI’s forward P/E is 14.50 and the company does not pay a dividend. The stock’s 52-week trading range is $26.15 to $49.29, and at today’s price that is about 49% above its 52-week low and 26% below the 52-week high. The company reports earnings next week and is expected to post EPS of $0.42 on revenue of $62 million. The EPS figure is less than the June quarter, but better than the same period a year ago.

Strayhorn Education has a median target price of $104.00 from 12 brokers. Shares are trading today at $83.06, for an implied gain of $20.94, or 25%. Strayhorn’s forward P/E is 11.39 and the company pays a dividend yield of 4.6%. The stock’s 52-week trading range is $69.34 to $165.73 Today’s price is about 29% above its 52-week low and 50% below the 52-week high. The company reports earnings on Thursday and is expected to post EPS of $1.07 on $139 million in revenue. That is a big dip from the same quarter a year ago, when EPS came in at $1.72, and an even bigger dip sequentially, from $2.53 in the June quarter.

DeVry has a median target price of $52.50 from 16 brokers. Shares are trading today at $38.14, for an implied gain of $14.36, or 38%. DeVry’s forward P/E is 8.55 and the company pays a dividend yield of 0.6%. The stock’s 52-week trading range is $34.24 to $66.85, and at today’s price that is about 11% above its 52-week low and 43% below the 52-week high. The company missed both EPS and revenue projections last week when it reported its first fiscal-quarter 2012 results. Enrollment was also lower as bleak job prospects keep potential students away.

Washington Post has a median target price of $275.00 from just a single broker. Shares are trading today at $336.80, about 18% above the target price. The forward P/E is 19.44 and the company pays a dividend yield of 2.6%. The stock’s 52-week trading range is $308.50 to $455.68. Today’s price is about 9% above its 52-week low and 26% below the 52-week high. The Kaplan education division of the company contributes more than 50% of Washington Post’s revenues and nearly half of net income. The company is expected to post EPS of $3.85 on revenue of $1 billion this Friday. The lack of coverage makes this stock a tough one to figure out.

Corinthian Colleges has a median target price of $2.00 from 10 brokers. Shares are trading today at $2.04, fractionally above the target price. Corinthian’s forward P/E is 9.93 and the company does not pay a dividend. The stock’s 52-week trading range is $1.24 to $6.12, and at today’s price that is about 65% above its 52-week low and 67% below the 52-week high.

Bridgeport Education has a median target price of $26.00 from 10 brokers. Shares are trading today at $22.94, for an implied gain of $3.06, or 13%. Bridgeport’s forward P/E is 8.88 and the company does not pay a dividend. The stock’s 52-week trading range is $13.89 to $30.62, and at today’s price that is about 65% above its 52-week low and 25% below the 52-week high. The company posted better-than-expected third-quarter earnings this morning and raised full-year EPS guidance to $2.95 to $2.98. Enrollment is expected to fall by about 5,000-8,000 students by the end of December.

Grand Canyon Education has a median target price of $18.50 from 10 brokers. Shares are trading today at $15.97, for an implied gain of $2.53, or 16%. Grand Canyon’s forward P/E is 13.22 and the company does not pay a dividend. The stock’s 52-week trading range is $12.26 to $20.66, and at today’s price that is about 30% above its 52-week low and 35% below the 52-week high. The company reports third-quarter earnings next week and is expected to post EPS 0f $0.25 on $109 million in revenues.

Career Education has a median target price of $20 from 11 brokers. Shares are trading today at $15.79, for an implied gain of $4.21, or 27%. The forward P/E is 8.77 and the company does not pay a dividend. The stock’s 52-week trading range is $12.24 to $27.60, and at today’s price that is about 29% above its 52-week low and 43% below the 52-week high. The company reports third-quarter earnings next week, and the consensus EPS estimate is $0.34 on $457 million in revenue. The EPS estimate has been trimmed from $0.46 over the past three months. Shares gained nearly 5% on October 19th, following the strong earnings report from Apollo.

Paul Ausick

Filed under: General Tagged: APEI, APOL, BPI, CECO, COCO, DV, EDMC, LOPE, STRA, WPO

Top Earnings Previews For The Week Ahead (FMCN, COCO, HNZ, TSL, WSM, AEO, AMAT, GES, TOL, ENER, KKD, OVTI, P)

Administrator — Fri, 19 Aug 2011 17:30:15 +0000

Earnings season has mostly wound down as far as the big market movers but there are still many companies dribbling out earnings reports. This coming week we have many companies that still matter which are due to release earnings and we would expect that these could be the big movers next week.

The top reports for the coming week are as follows: Focus Media Holding Ltd. (NASDAQ: FMCN); Corinthian Colleges Inc. (NASDAQ: COCO); H J Heinz Co. (NYSE: HNZ); Trina Solar Ltd. (NYSE: TSL); Williams Sonoma Inc. (NYSE: WSM); American Eagle Outfitters Inc. (NYSE: AEO); Applied Materials Inc. (NASDAQ: AMAT); Guess Inc. (NYSE: GES); Toll Brothers Inc. (NYSE: TOL); Energy Conversion Devices Inc. (NASDAQ: ENER); Krispy Kreme Doughnuts Inc. (NYSE: KKD); Omnivision Technologies Inc. (NASDAQ: OVTI); and Pandora Media Inc. (NYSE: P).

We have compiled previews using Thomson Reuters estimates, shown price data on each and added color if applicable.

Monday, August 22

Focus Media Holding Ltd. (NASDAQ: FMCN) has estimates of $0.37 EPS and $162.7 million in revenues; next quarter estimates are $0.43 EPS and $174 million in revenues. Shares are trading around $28.02 and the 52-week trading range is $17.71 to $37.58. So far, Focus has managed to avoid the China bashing trades because it is more established and investors believe that it is one of the real-deal companies. Valuations still remain high but that is because growth expectations remain here for the long-term.

Tuesday, August 23

Corinthian Colleges Inc. (NASDAQ: COCO) has estimates of $0.11 EPS and $427.6 million in revenues; next quarter estimates are $0.15 EPS and $427.02 million in revenues. Shares are trading around $2.36 and the 52-week trading range is $2.315 (hit on Friday) to $7,35. Just another down and out education stock.

H J Heinz Co. (NYSE: HNZ) has estimates of $0.76 EPS and $2.78 billion in revenues; next quarter estimates are $0.85 EPS and $2.89 billion in revenues. Shares are trading around $52.20 and the 52-week trading range is $45.52 to $55.00.

Trina Solar Ltd. (NYSE: TSL) has estimates of $0.47 EPS and $599.44 million in revenues; next quarter estimates are $0.60 EPS and $644.43 million in revenues. Shares are trading around $13.75 and the 52-week trading range is $12.75 (hit Friday) to $31.89. What can the solar sector look forward to right now?

Williams Sonoma Inc. (NYSE: WSM) has estimates of $0.36 EPS and $823.97 million in revenues; next quarter estimates are $0.39 EPS and $861.24 million in revenues. Shares are trading around $28.90 and the 52-week trading range is $24.57 to $45.48. It has been impossible to not notice the sell-off here in this cyclical retailer that does less-good in had times and scores in boom-times. The stock has suffered handily since July when Goldman Sachs raised its ratings in a solid outlook call.

Filed under: Calendar, Earnings, The Week Tagged: AEO, AMAT, COCO, ENER, FMCN, GES, HNZ, KKD, OVTI, P, TOL, TSL, WSM

Another Bruise in For-Profit Education Players (STRA, APOL, COCO, DV, EDMC)

Administrator — Thu, 28 Jul 2011 15:35:54 +0000

Publicly traded for-profit college stocks have been on a two-year roller coaster ride that looked like it was sorting itself out early in June. At that time, the US Department of Education ruled that its “gainful employment” rule would not take effect until 2015, a surprise ruling because most observers were expecting the rule to take effect immediately.

That announcement was followed earlier this week by the inclusion of an increase in Pell grants under both Republican and Democratic debt-ceiling proposals. That also boosted the sector. But today’s earnings report from Strayer Education Inc. (NASDAQ: STRA) may have tossed a wrench into the works. Higher costs and lower enrollments are pummeling Strayer stocks, down about -13% in early trading. Shares in Apollo Group Inc. (NASDAQ: APOL), Corinthian Colleges, Inc. (NASDAQ: COCO), DeVry Inc. (NYSE: DV), and Education Management Corp. (NASDAQ: EDMC) are all trading lower this morning as well.

Strayer didn’t perform all that poorly. The company reported EPS of $2.53/share compared with a consensus estimate of $2.39. Revenue of $163.8 million failed to meet an estimate of $166 million however. Operating margin fell from 38.6% in the same period a year ago to 30.6% and enrollment fell 8.5% year-over-year. New-student enrollment fell -21% and global online enrollment fell -12%.

Strayer’s 52-week trading range is $113.25-$241.76, and the stock closed yesterday at $143.25, a drop of -41%. Following the Department of Education ruling in June, Goldman Sachs raised the company’s target price from $137 to $151. Strayer’s shares trading today at around $124.50.

Short selling has been a hallmark of the sector for a while, as hedge funds have been betting against the schools due to their students’ poor loan repayment records. Shorts hold about 32% of Corinthian College’s float and about 23% of Strayer’s.

The Department of Education has reported that 12% of all higher education students are enrolled in for-profit colleges, that these students receive 26% of all student loans, and that 46% of all loan dollars are in default. The defaults are in large part attributed to the fact that graduates have poor luck getting a job after they finish their program.

New enrollments are the key to profits here. As long as the schools keep bleeding students they will also continue to bleed revenue and profits.

Paul Ausick

Filed under: Corporate Governance, Earnings Tagged: APOL, COCO, DV, EDMC, STRA

For-Profit Education Sees Massive Win in D.C. Loss (STRA, APOL, CECO, EDMC, COCO, ESI, DV)

Administrator — Thu, 02 Jun 2011 13:03:26 +0000

The final version of the regulatory acts against for-profit education companies is far less troublesome on the surface than what had been originally proposed. It is also far less stringent than many investors had feared. The Department of Education is now targeting a federal gainful-employment regulation that will effectively block federal aid to students with excessive debt at graduation who cannot get jobs that allow them to afford that debt. These institutions and their students must meet some employment benchmarks to quality for future federal aid. At least 35% of graduates must be paying their student loans. The other criteria is that annual loan payments must not be more than 30% of discretionary income nor more than 12% of a graduate’s total earnings.

For-profit education stocks are soaring on the news even if this seems harsh on the surface.

Strayer Education Inc. (NASDAQ: STRA) was called “in full compliance” by RBC… Shares are up 19% at $145.50 versus a 52-week range of $113.25 to $255.65.

Apollo Group Inc. (NASDAQ: APOL) is up almost 13% at $48.40 and the 52-week range is $33.75 to $53.61, but this hit $75.00 in late 2009.

Career Education Corp. (NASDAQ: CECO) is up 18% at $27.00 against a 52-week range of $16.36 to $28.57, but this was $35.00 in late 2009.

Education Management Corporation (NASDAQ: EDMC) is up almost 15% at $23.32 and the 52-week range is $7.76 to $23.19. This one came public in late-2009. BofA raised its rating today.

Corinthian Colleges Inc. (NASDAQ: COCO) is up 39% at $5.55 as its 52-week range is $3.76 to $13.16.

ITT Educational Services Inc. (NYSE: ESI) is up over 26% at $89.77 versus a 52-week range of $50.00 to $102.32.

DeVry, Inc. (NYSE: DV) is up almost 16% at $62.60 and its 52-week range is $36.34 to $59.53. This was a $70 stock just over a year ago. BofA raised its rating.

We always wondered throughout this entire process how and why these schools have not fought harder for more of the same scrutiny to be placed upon community colleges or other universities because many students emerge with student debt that can be higher than this. Many discount online degrees and for-profit education degrees, but in today’s job market it seems a bit pressuring to make these institutions live up to employment standards.

JON C. OGG

Filed under: Business Services, Compensation, Corporate Governance, Entertainment, Politics Tagged: APOL, CECO, COCO, DV, EDMC, ESI, STRA

Top Active Trader Alert Stocks (APOL, COCO, CIGX)

247wallst — Thu, 02 Jun 2011 12:59:17 +0000

Active traders and day traders have many stocks to choose from this Thursday morning. We are tracking news and moves in shares of Apollo Group, Inc. (NASDAQ: APOL), Corinthian Colleges, Inc. (NASDAQ: COCO), and Star Scientific (NASDAQ: CIGX).

Apollo Group, Inc. (NASDAQ: APOL) is up 12.82% to $47.60, relative to a 52-week range of $33.75-$53.67. The Education Department is changing rules on access for institutions to federal loans. The new set of guidelines will be released today.

Corinthian Colleges, Inc. (NASDAQ: COCO) is up 37% to $5.49, relative to a 52-week range of $3.76-$13.16. Shares are being affected by the same news from the Education Department.

Star Scientific (NASDAQ: CIGX) is up nearly 4% to $4.42, relative to a 52-week range of $1.24-$5.25.

Filed under: Pre-Market Activity, Trading Alert Tagged: APOL, CIGX, COCO

For-Profit Colleges: Looking for Bottom as Enrollments Fall (APOL, STRA, EDMC, COCO, CECO, DV)

Administrator — Tue, 11 Jan 2011 17:27:09 +0000

The University of Phoenix, owned by Apollo Group, Inc. (NASDAQ: APOL), reported first fiscal quarter revenue of $1.33 billion and EPS of $1.61, both higher than expectations of $1.26 billion in revenue and EPS of $1.35. The sector needed some good news following a report from Strayer Education Inc. (NASDAQ: STRA) that enrollment was down 20% sent sector for-profit schools’ stocks plunging. Enrollments are declining, political pressure remains, and the for-profit college model is under severe pressure. It is a hard sell, but after the for-profit education sector has been gutted it is fair to ask if there is now some value in those companies which can survive.

Despite its rosy quarterly report, Apollo noted that its new-student enrollment was down 42% from the same period a year ago. Enrollment in degree programs also declined 3.8% year-over-year. Apollo also noted in its conference call that it expects new-student enrollment declines in the second quarter “to be about the same as the first quarter,” according to Bloomberg. That’s the real story as far as the for-profits are concerned.

Strayer reports quarterly earnings on February 7th, and is expected to post EPS of $2.66 on revenue of $174 million. Education Management Corp. (NASDAQ: EDMC) reports February 9th, and is touted for EPS of $0.61 on revenue of $770 million. Corinthian Colleges, Inc. (NASDAQ: COCO) reports earnings January 31st, and is expected to post EPS of $0.22 on revenue of $476 million. Career Education Corp. (NASDAQ: CECO) reports February 17th, and is expected to show EPS of $0.78 on revenue of $552 million, while DeVry Inc. (NYSE: DV) reports January 25th, targeted for EPS of $1.19 on revenue of $549 million.

In its earnings release, Apollo attributed the enrollment decline to “the adverse impact on the admissions process arising from changes in the way admissions and other employees are evaluated and compensated, the full implementation of University Orientation as well as continued refinement of the Company’s marketing approaches.” The company’s CEO also said that Apollo “expect[s] increasing declines in total enrollment as we move through the year.” Not a good prognosis.

The for-profit schools can no longer pay admissions officers based on the number of students they enroll, which is causing the schools to hire more highly skilled admissions people who get higher salaries. The schools also offer required orientation programs and have gone to more aggressive marketing programs, like letting students attend classes for no charge for a while to evaluate the courses.

Strayer’s CEO blamed his school’s troubles on “important public policy commentators…as well as significant media who have questioned the efficacy of investor-funded education,” reports The Wall Street Journal.

The low graduation rates and the low loan repayment rates these schools report have nothing to do with their falling enrollments, right? It is always hard to consider former growth mechanisms as value stocks and ‘value’ will depend upon how Apollo and its peers can hold up against the industry pressures.

It does seem odd that none of these for-profit education companies discuss the costs behind ‘non-profit’ universities. If you have ever paid for university tuition, it doesn’t feel like it is not for profit. Still, calling a bottom in a political minefield is not an easy task and the verdict is still likely some time out from today.

Sometimes even bad news mixed with less-bad news can be taken as good news. Apollo shares are up 12% at $40.25 in active trading against a 52-week range of $33.75 to $66.69.

Paul Ausick

Filed under: Earnings, Entertainment, Politics Tagged: APOL, CECO, COCO, DV, EDMC, STRA

When Disaster Strikes: Corinthian Colleges Loses CEO After President Leaves (COCO, APOL, STRA, EDMC, CECO)

Administrator — Wed, 01 Dec 2010 16:03:46 +0000

The battering continues among for-profit colleges. Faced with federal rules changes that could affect their ability to secure student loans, the colleges have seen their stock prices tank in the past 12 months. The biggest loser has been Corinthian Colleges Inc. (NASDAQ: COCO), which has watched its share lose more than 70% of their value. That loss doesn’t look like it will improve any, as the company’s CEO resigned last night, just a month after its president/COO also resigned. The former CEO will take over the CEO’s role, but no replacements are expected to be hired.

Another for-profit player, Apollo Group Inc. (NASDAQ: APOL), which owns the University of Phoenix, has announced that it will lay off 700 employees at its campuses, mostly in its admissions offices. Apollo expects to save about $8 million a quarter in salaries and will take a charge of about $5 million against quarterly earnings in its quarter ending today.

New rules for student loans would link eligibility with loan repayment rates has hit all the for-profit schools hard. DeVry Inc. (NYSE: DV), Strayer Education Inc. (NASDAQ: STRA), Education Management Corp. (NASDAQ: EDMC), and Career Education Corp. (NASDAQ: CECO) have all experienced share declines from -20% to -40%.

Another proposed rule change that is having its impact is a prohibition against paying admissions officers for enrolling more students. These bonus payments led to the for-profit colleges receiving almost 23% of available federal grants and loans in 2008-2009, while enrolling only about 12% of students.

The bleeding could stop, or at least slow down, after the new Congress goes into session next year. Several Republican party senators have objected to the way the Department of Education has handled the unveiling of the new regulations. Senator Enzi of Wyoming has charged the Department with “beating up” the for-profit schools.

Still, schools should not expect a big change because investigations have been started in some states to determine if, in fact, the for-profit schools mislead students. No serious politician wants to stand up for con-men.

Corinthian’s problem is that it exceeds a hard limit of 90% on the amount the federal government will pay in the form of grants and loans for enrolled students. The only way it can meet the federal rules is to enroll fewer students. That will stunt the school’s growth and drive its share price down even more.

Corinthian’s share price is off about -2% so far this morning, and the shares are approaching their 52-week low of $3.91, set less than a month ago.

Paul Ausick

Filed under: Labor & Unions, Management Change Tagged: APOL, CECO, COCO, EDMC, STRA

Are New Rules For For-Profit Colleges An Opportunity? (APEI, WMT, APOL, EDMC, CECO, COCO, DV, STRA, WPO)

247wallst — Mon, 22 Nov 2010 15:11:27 +0000

Earlier this month, while everyone’s attention was focused on the midterm elections, the US Department of Education published proposed new rules governing access to federal direct and federally guaranteed student loans. The most controversial of the new rules is that to maintain their eligibility to receive new student loan funds schools must maintain a repayment rate of 65%. Repayment means that interest and principle payments are up to date.
That may sound like a pretty low bar, but the repayment rate at for-profit colleges is a mere 36%. The threat to loan funds available to students at for-profit schools has pushed share prices down by an average of about 32% since the beginning of the year. American Public Education, Inc. (NASDAQ: APEI) has bucked the trend, staying about flat due mainly to a deal with Wal-Mart Stores, Inc. (NYSE: WMT). For-profit schools including Apollo Group, Inc. (NASDAQ: APOL), which owns the University of Phoenix, Education Management Corp. (NASDAQ: EDMC), Career Education Corp. (NASDAQ: CECO), Corinthian Colleges, Inc. (NASDAQ: COCO), DeVry Inc. (NYSE: DV), and Strayer Education, Inc. (NASDAQ: STRA) are all down at least 20%, with Corinthian down nearly 70% in the past 52 weeks. The Washington Post Co. (NYSE: WPO), owner of the Kaplan schools and test preparation programs, is down only slightly in the same time period, thanks in large part to its for-profit schools.
The schools have been under fire for their student loan practices for years, and the Secretary of Education notes that “students attending for-profit schools are the most likely to default [on student loans]. While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not. Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use. This is a disservice to students and taxpayers, and undermines the valuable work being done by the for-profit education industry as a whole.”
Federal rules prohibit a school, public or private, from collecting more than 90% of its student fees in the form of federal loans and grants. Some of the schools, such as The University of Phoenix and the Kaplan schools, are in danger of exceeding that limit, which, of course, would limit enrollment and, ultimately, growth. Corinthian has already said that “a substantial percentage” of its schools may exceed the 90% limitation.
Even worse from the schools’ perspective is a rule that would require schools to track the number of graduates who are gainfully employed and can pay back their loans. The for-profit schools have raised such a stink about this rule that the Dept. of Education has agreed to delay a rule until sometime next year.
The change of political control in the US House of Representatives is not expected to reverse the drive for tighter federal oversight of loans and grants. The state of Florida is investigating whether Kaplan, Phoenix, and others may have misrepresented themselves to students. The Republican party, which has mostly been sympathetic to the for-profit schools, is not expected to press for relaxing the rules while the schools are under investigation.
The news on regulations at for-profit schools has been around long enough to have been priced in to different companies’ stocks. For some this may seem like a buying opportunity, but unless Congress takes action, which is highly doubtful, the regulations overhang will keep weighing on these stocks, no matter how good their balance sheets look.

–Paul Ausick

Filed under: Turnarounds Tagged: APEI, APOL, CECO, COCO, DV, EDMC, STRA, WMT, WPO