Shares of Apollo Education Group, Inc. APOL gained 10.02% in pre-market trading as the company announced its plans to explore strategic options that can bring about a change in the control of the company. Concurrently, the post-secondary education provider announced weak first-quarter fiscal 2016 results.
Apollo Education’s adjusted earnings of 29 cents per share in the first quarter of fiscal 2016 missed the Zacks Consensus Estimate of 31 cents by about 6.5%. However, earnings declined 37% year over year due to lower revenues.
Adjusted earnings exclude restructuring and impairment charges, acquisition costs and other special items.
Net revenue of $586 million lagged the Zacks Consensus Estimate of $610 million by 3.9%. Revenues declined 18% from the prior-year quarter due to lower enrollments.
Adjusted EBITDA was $80.2 million during the quarter, down 32.2% year over year.
Segment Details
University of Phoenix (UOP) revenues declined 22% year over year to $462.6 million due to a 22.2% drop in total enrollment to 176,900. New enrollment, or starts, at UOP declined 38.1% year over year to 24,500.
UOP’s enrollments have been sluggish for several quarters now due to regulatory challenges, and changes and competition in the higher education industry. Though the company has adopted several initiatives to transform UoP into a “smaller, but better performing” university, these efforts are yet to pay off.
Apollo Global reported net revenue of $115.3 million, almost flat year over year.
Other Schools reported revenues of $8.1 million in the first quarter of fiscal 2016, up 24.6% year over year.
Strategic Initiatives
Apollo Education informed that its board of directors intends to explore “strategic alternatives” and has appointed Barclays and Credit Suisse as financial advisors. The company is in discussions, which may result in a “change of control” at the company. Management expects this move to support its strategic initiatives, which includes transforming UOP, expanding Apollo Global and improving student outcome.
Apollo Education Group carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the education industry include Lincoln Educational Services Corp. LINC, DeVry Education Group Inc. DV and TAL Education Group XRS, each sporting a Zacks Rank #1 (Strong Buy).
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