Zacks Investment Research downgraded shares of Apollo Education Group, Inc. (APOL) from OUTPERFORM to NEUTRAL on April 21, 2014, with a target price of $29.00.
We revert to a Neutral recommendation on Apollo after the company reported mixed second-quarter fiscal 2014 results. Though cost reduction and improved efficiency helped Apollo beat the Zacks Consensus Estimate for earnings, it declined 17.6% year over year due to weak revenues and lower margins. Apollo's revenues have remained weak for several quarters due to declining enrollment trends. Encouragingly, however, starts improved sequentially in the fourth quarter. Apollo's accelerated efforts to right-size its business through significant layoffs and campus closings will give it a competitive advantage in the long term. Moreover, its aggressive investments in academic quality and recent price cuts should improve student value proposition and retention rates. Though we believe these turnaround efforts should eventually improve enrollment trends and boost margins, we await better visibility before having a more bullish outlook on the stock.
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