Enrollment at the company’s Strayer University fell by 5% year-over-year, and across the company’s entire system, including online classes, enrollment was down 4%.

To cope with the falling enrollments, the company said it would raise tuition by 3% beginning in January. The increase is not expected to have a positive impact on revenue per student. Expenses in 2013 are expected to rise 1% to 2%, mainly to support the eight campuses the company opened in 2012. No new campuses are planned for next year.

The company guided fourth-quarter diluted EPS at $1.43 to $1.45 and full-year EPS at $5.73 to $5.75. The consensus estimates call for fourth-quarter EPS of $1.59 on revenues of $145.13 million, as well as full-year EPS of $5.83 on revenues of $564.44 million.

For fiscal year 2013, Strayer guided EPS at $5.40 to $5.60, compared with a consensus estimate of $5.56.

For all its troubles, Strayer is better off than Career Education Corp. (NASDAQ: CECO), which posted a quarterly loss of $0.50 last night after a decline of 23% in student enrollment. The company said it would close 23 campuses and cut 900 jobs.

Strayer’s shares are down more than 8% in premarket trading this morning, at $51.50 in a 52-week range of $54.81 to $120.00. The low was set yesterday and figures to go lower today. The consensus target price for the shares was around $80.00 before today’s report.

Paul Ausick

Apollo and other for-profit schools like DeVry Inc. (NYSE: DV), Strayer Education Inc. (NASDAQ: STRA), and Corinthian Colleges Inc. (NASDAQ: COCO) have all struggled with recent federal restrictions on recruitment and student loan requirements. Grand Canyon Education Inc. (NASDAQ: LOPE) has managed to prosper in the new environment by keeping its tuition costs low and attracting more students to online programs.

Apollo announced that it will close 115 of its locations, including 25 campuses and 110 learning centers, a move that will affect about 13,000 students. That will leave the school with 112 locations. The University of Phoenix claims 328,000 students enrolled in degree programs, and new student enrollments in the quarter of 52,800. Both represent double-digit declines from a year ago.

For these schools, the still-high unemployment rates stunt enrollments because there are so few prospects after the course of study is completed. Job prospects have not been much better for college graduates of traditional non-profit schools, but the outlook is improving somewhat for 2013 graduates according to the National Association of Colleges and Employers (NACE).

Grand Canyon Colleges has managed to avoid the carnage by limiting its physical presence to one location and enrolling more students in online classes. The school, a Christian liberal arts university, has also kept its tuition lower than tuition at local state schools in Arizona. These advantages may begin to evaporate as state and private non-profit colleges expand online offerings.

Today, though, the for-profit schools are getting hammered. Apollo’s shares are down 17.7% at $22.62 after posting a new 52-week low of $22.50. The prior 52-week range was $25.77 to $58.29.

DeVry shares are down 3% at $22.51 in a 52-week range of $18.15 to $46.92.

Strayer’s shares are down 5.8% at $65.66 in a 52-week range of $62.53 to $100.00.

Corinthian Colleges’ shares are off 4.9% at $2.53 in a 52-week range of $1.69 to $5.21.

Shares of Grand Canyon are also down, about 1.5% at $23.00 in a 52-week range of $14.12 to $24.41.

Paul Ausick

The company posted a net loss of $6.5 million mostly as the result of one-time charges for discontinued operations. On an adjusted basis, the company posted quarterly EPS of $0.10.

The company’s chairman/CEO said:

Fiscal 2012 was a year of progress against a backdrop of adapting to regulatory change. We continued to focus on student completion and achieved a slight increase in our graduate placement rate despite a weak economy.

Corinthian offered first fiscal quarter guidance for EPS of $0.03-$0.05 on revenue of $395-$405 million. Enrollment is forecast as essentially flat, at up or down 1%. The consensus estimate for the quarter called for EPS of $0.04 on revenue of $407 million.

But as with rivals Apollo Group Inc. (NASDAQ: APOL), Strayer Education Inc. (NASDAQ: STRA), Grand Canyon Education Inc. (NASDAQ: LOPE), Education Management Corp. (NASDAQ: EDMC), and American Public Education Inc. (NASDAQ: APEI) growth may be a thing of the past. A new regulatory environment limits the amount of federal funds to 90% of a school’s total revenue and imposes new guidelines on employment for graduates.

To compensate for flat enrollments and federal funding cuts, schools are cutting expenses, with some making large cuts in educational services. Corinthian, for example, shaved over $13 million from its educational services costs in the fourth quarter, though marketing and admissions costs were up nearly $5 million.

Corinthian’s shares are down nearly 9.5% at $2.22. The current 52-week range is $1.24-$5.21. Thomson Reuters had a consensus analyst price target of $3.54 before today’s results were announced.

Paul Ausick

Strayer was founded in 1892 as Strayer’s Business College. Currently, it is called Strayer University. Strayer offers a number of online programs, but it also has campuses in many parts of the eastern United States. Strayer does have several novel programs, the most unusual of which is the “Alumni Monthly Giveaway.” As Strayer describes it:

Starting in August 2012, the Office of Alumni Relations will hold a monthly giveaway to give alumni who have activated their online accounts and updated their profiles, a chance to win a special gift.

The winner of the giveaway will get “a $50.00 Gift Certificate to Staples for your back to school or office needs.” Quite a prize, and a clever way to get those “online accounts activated.”

Strayer’s stock is listed on Nasdaq under the symbol (NASDAQ: STRA). Revenues for the three months ended June 30, 2012, decreased 11% to $146.3 million. Net income was $21.2 million, compared to $29.6 million for the same period in 2011, a decrease of 28%. Despite the size of the company, which is relatively small, CEO Robert S. Silberman made more than $43 million between 2009 and 2011, according to the firm’s proxy. The sum is particularly impressive because Strayer’s shares traded for $253 in April 2010, but that number was just above $70 recently.

None of this is to say that there is anything wrong with Strayer, its business or management. It is just that Strayer is an odd place for one of the great CEOs of the past several decades to put his management school. What ever happened to Princeton, MIT and Yale?

Douglas A. McIntyre

The company said that enrollment for the summer term at its DeVry University is expected to fall by 15% to 17% from the 2011 term.  Its earnings warning is even worse: $0.43 to $0.46 versus estimates of $0.79 EPS. What is amazing is how so many analysts just this one wrong. It was obvious that things were bad in this sector, but THIS BAD???  We have seen at least four downgrades so far this Tuesday:

• Cut to Neutral from Buy at BofA-Merrill Lynch
• Cut to Neutral from Buy at Citigroup
• Cut to Underweight from Neutral at J.P. Morgan
• Cut to Perform from Outperform at Oppenheimer

Apollo Group Inc. (NASDAQ: APOL), which owns the University of Phoenix, is down 6% at $27.18 at a new 52-week low. Corinthian Colleges Inc. (NASDAQ: COCO) is down 4.4% at $2.34 but that is nowhere close to a 52-week low. Strayer Education Inc. (NASDAQ: STRA) is down 8% at $93.44.

DeVry shares are not just at a 52-week low.  They are at multi-year lows.  After a 24% drop to $20.85, its prior 52-week range was $26.13 to $66.08. DeVry shares are now trading at less than half the price from the peak of selling in early 2009 during the height of the recession.

JON C. OGG

And while the decision is specific to Bridgepoint’s Ashford University, other for-profit schools are seeing shares fall as well today. Career Education Corp. (NASDAQ: CECO) is off the most, down -6.4% at $6.43 in a 52-week range of $5.32-$25.26.

Apollo Group Inc. (NASDAQ: APOL) is off -3% at $35.21, Corinthian Colleges Inc. (NASDAQ: COCO) is down -2.7% at $3.05, and DeVry Inc. (NYSE: DV) is off -2.4% at $30.74.

ITT Educational Services Inc. (NYSE: ESI) is off -2% and Strayer Education Inc. (NASDAQ: STRA) is down -1.4%.

In order to qualify for federal funds, colleges must be accredited. For-profit schools depend on student fees — some 90% of which are paid with federal grants and guaranteed student loans — for the lion’s share of their revenues. The loss or denial of accreditation could well be a death knell for a for-profit institution.

Ashford is currently accredited by the Higher Learning Commission of the North Central Association of Schools and Colleges through the 2014-2015 school year. But this accrediting body is also bearing down on Ashford, telling the school that “it has until December 1, 2012, to demonstrate compliance with HLC’s ‘substantial presence’ requirement.” Ashford had intended to gain accreditation from WASC because a substantial portion of the school’s activities to support its online programs are based in the WASC accrediting region.

Bridgepoint’s stock is down -23% at $16.57 after posting a new 52-week low this morning of $14.25. The previous 52-week range was $16.01-$30.62.

Paul Ausick

There has been chatter today that this Harkin proposal may actually turn into legislation.  Herb Greenberg tweeted this earlier as some of these stocks are being hit today.  What is interesting is that any further legislation is not likely to gain much support today.  Still, it is an election year and any change-in-control of the House of Senate could change the future of the for-profit education sector.

READ ALSO: STUDENT DEBT TO HIT $1 TRILLION BY END OF 2012

Here is how the shares of some of the for-profit players are faring today:

• Apollo Group Inc. (NASDAQ: APOL) is down 3.4% at $33.13 against a 52-week range of $30.93 to $58.29.
• Career Education Corp. (NASDAQ: CECO) is down 3.2% at $6.09 aginst a 52-week range of $5.88 to $25.26.
• DeVry, Inc. (NYSE: DV) is down 3.4% at $27.33 against a 52-week range of $26.13 to $66.85.
• Strayer Education Inc. (NASDAQ: STRA), which has its deal with Jack Welch, is down 3.4% at $86.95.
• Corinthian Colleges Inc. (NASDAQ: COCO) is down only 1.5% at $2.58 and its 52-week range is $1.24 to $5.21.
• Education Management Corporation (NASDAQ: EDMC) is down 2% at $6.61 and is at a year low as the prior 52-week range was $6.70 to $29.90.
• ITT Educational Services Inc. (NYSE: ESI) is down 1% at $54.31 against a 52-week range of $50.22 to $95.52.

This sector has been under fire for years now and 2012 has not been kind to these stocks.  By proposing to limit the ability of these institutions’ marketing and recruiting efforts, you could make the case that it looks and feels like some of the same limitations as those of tobacco companies and their marketing efforts. The comparison is of course extreme, and for-profit education outfits do not pay the same in federal and local taxes compared to the tobacco companies. It is safe to say “Smoking kills.”  Is the same true of for-profit education companies?

JON C. OGG

A quick check of seven of these for-profit schools shows that over the past five years only one is showing a profit: DeVry Inc. (NYSE: DV) is up 6.6% since April of 2007. For the same period, Apollo Group Inc. (NASDAQ: APOL) is down -29%, Career Education Corp. (NASDAQ: CECO) is down -77%, Corinthian Colleges Inc. (NASDAQ: COCO) is down -74%, Strayer Education Inc. (NASDAQ: STRA) is down -33%, and the Washington Post Co. (NYSE: WPO), owner of the Kaplan franchise, is down -50%.

Capella reported this morning that first quarter EPS came in at $0.82 on revenue of $109.4 million. The consensus estimates called for EPS of $0.78 on revenue of $110 million. In the same period last year Capella posted EPS of $0.90 on revenue of $111.35 million.

What hurt the company today is its enrollment forecast. Capella’s new student enrollments have fallen for six straight quarters, including a loss of -5% in the first quarter of 2012. The company’s CFO said in a conference call that Capella is “less optimistic” about enrollment growth throughout 2012, and that the company expects to see enrollment declines in “the high single-digit” range for the current quarter.

Contributing to the enrollment troubles at Capella and the others is recent legislation introduced into the US House of Representatives that would severely curtail the use of any federal money by the schools to advertise and market to potential students. The legislation would also apply to non-profit schools, but the impact would be greatest on the for-profits.

The legislation faces stiff opposition in both the House and the Senate and may well be defeated. That is not likely to not constrain future efforts to rein in the flow of federal dollars to for-profit schools.

Capella’s shares are down -9.6% at about noon today, at $31.12 in a 52-week range of $26.12-$54.86.

Paul Ausick

The unofficial closing bells put the DJIA up more than 123 points to 12,904.01 (0.96%), the NASDAQ rose more than 44 points (1.51%) to 2,959.85, and the S&P 500 rose 1.1% or nearly 15 points to 1,358.05.

There were several analyst upgrades and downgrades today, including Amazon.com Inc. (NASDAQ: AMZN) cut to ‘equal-weight’ at Morgan Stanley; Deere & Co. (NYSE: DE) cut to ‘market perform’ at Wells Fargo; Nvidia Corp. (NASDAQ: NVDA) cut to ‘neutral’ at BofA/ML; Lorillard Inc. (NYSE: LO) started as ‘buy’ at Jefferies; and MEMC Electronic Materials Inc. (NYSE: WFR) raised to ‘hold’ at Jefferies.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Advance Auto Parts Inc. (NYSE: AAP) is up 7.3% at $85.20 after posting a new 52-week high of $86.30; Apache Corp. (NYSE: APA) is up 0.14% at $107.82; Barrick Gold Corp. (NYSE: ABX) is up 1.24% at $48.02; DirecTV (NASDAQ: DTV) is down -1.9% at $45.41; Duke Energy Corp. (NYSE: DUK) is up 1.53% at $21.19; General Motors Co. (NYSE: GM) is up 9% at $27.17; Molson Coors Brewing Co. (NYSE: TAP) is up 3% at $45.18; Strayer Education Inc. (NASDAQ: STRA) is down -8% at $105.81; and PF Chang’s China Bistro Inc. (NASDAQ: PFCB) is up 2% at $35.35.

Other standouts from today include the following stocks:

Jingwei International Ltd. (NASDAQ: JNGW) is up more than 43% at $2.08. The Chinese software company is being taken private.

Advance America, Cash Advance Centers Inc. (NYSE: AEA) is up more than 32% at $10.46 after posting a new 52-week high of $10.55 early this morning. The cash advance provider is being acquired by Mexico’s Grupo Elektra for $10.50/share, for a total price of about $655 million.

HyperDynamics Corp. (NYSE: HDY) is down nearly -30% at $1.42 after posting a new 52-week low of $1.01 earlier this morning. The independent oil & gas exploration and production company reported only non-commercial quantities of hydrocarbons at its offshore West African field.

PMFG Inc. (NASDAQ: PMFG) is down nearly -20% at $16.85. The machinery maker has announced a secondary offering of 2.6 million shares at $16/share.

Avis Budget Group Inc. (NYSE: CAR) is down nearly -16% at $12.28. The car rental company posted an unexpected loss in the fourth quarter.

Stay tuned for Friday. We have noted the following events on the schedule (all times Eastern):

• 8:30 a.m. – Consumer price index
• 10:00 a.m. – Leading economic indicators

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Paul Ausick

The for-profits face tighter rules on recruiting and somewhat closer oversight on graduation and job placement rates. Student loan defaults continue to be a problem, and last month the US Government Accounting Office reported on widespread cheating at some of the schools. And one of the schools, Career Education Corp., had its CEO resign. All in all, what was once a high-flying sector has lost a good deal of its appeal.

Apollo Group, which owns the University of Phoenix, is the largest of the for-profit operators based on student enrollment. The company’s stock has a median target price of $54.00, up from $53.00 on November 1st. At a current price of $50.01 at around noon today, the potential upside for the shares is 8%. Shares have gained nearly $4.00 since November 1st.

The Washington Post owns the Kaplan schools. The company’s median target price is a meaningless $275.00 from a single broker who must not have noticed that the share price is now $349.00. The drag on the company’s stock comes from its newspaper operations, of course, without which the Post would be operating at a loss.

Strayer has a median target price of $100.00, down from $104.00 on November 1st. The current share price is $99.43, leaving an implied gain of less than 1%. The company recently purchased the Jack Welch Institute of Management, which gave the stock a shot in the arm. Shares are down about -28% for the past 12 months.

DeVry has a median target price of $52, slightly lower than its target of $52.50 on November 1st. The shares are trading today at $35.22, for a potential upside of 47.6%. The stock goes ex-dividend tomorrow in advance of its twice-yearly dividend payment of $0.15/share. DeVry’s stock is down nearly -20% for the past 12 months.

Career Education has a median target price of $9.50, a drop of more than -50% from its target of $20.00 on November 1st. Shares are trading today at $7.33, for a potential upside of 29.6%. Of all these stocks, this one has been hammered the most over the past year, with a share price loss of nearly -61%. The CEO resigned last month, and 49 of the company’s schools must this month show reasons why they should not lose their accreditation.

Of these schools, only Apollo, which has seen its share price grow by about 37% in the past year offers even the remotest opportunity for investors. The stock’s 52-week high is less than $0.25 higher than its new target price, and the company claims that it came out clean in the GAO cheating investigation because it was one of the three schools to deny admission to students based on insufficient credentials. Enrollments are the key for Apollo, though, and it will have to spend more to keep those enrollments up.

The rest of this group is so weak that even lowered targets may be well out of reach. Overall, for-profit schools are unlikely to repeat the rapid growth they managed just a few years ago. There could be some consolidation in this sector or some closures. Either would be a big help.

Paul Ausick