Q3 Preview: Enrollment Trends Should Have Apollo Group (APOL) Cutting Costs

Apollo Group (Nasdaq: APOL) shares are looking a little remedial Monday heading into the private-education company's third-quarter 2012 results, expected out after the market closes.

Analysts are looking for EPS of 97 cents on revs of $1.12 billion. If Apollo can hit the expectations, earnings would be up 67 percent sequentially, but down 33 percent from the same period last year.

Shares of Apollo fell 25.4 percent though the quarter, to $31.82 at the end of May. The stock is up 2 percent since, but off about 40 percent for the year. Over the last year, Apollo shares have moved between $30.93 and $58.29.

Data from Bloomberg shows 10 analysts with a Buy rating on Apollo, 10 at Hold, and none at Sell. The Street's price target average is $46, which ranges from $36 to $55.

Of note, the stock is trading near its 50-day SMA at $33.59.

Analyst Comments

• Goldman Sachs is looking for EPS of 96 cents in the quarter. The firm recently initiated coverage on Apollo at Neutral, saying it wasn't convinced "it will see the -2% yoy revenue implied by consensus next year."
  
  In terms of revenue growth, Goldman said, "Our estimates are in line with consensus for this year, 4% below in 2013, including buybacks and some cost reductions. We see margins remaining depressed through 2014, though view its efforts to differentiate on technology both in its own product and as an enabler for others constructively."
  
  Drivers to growth include shifting to higher-level degrees from a glut of associate's students, as well as reshaping overhead costs to come more in-line with recent enrollment declines.
  
  
• Wells Fargo sees EPS of 94 cents and revs of $1.15 billion. The firm thinks investors will likely focus on cost per start and better conversion rates, not to mention guidance which highlights momentum from the third quarter (where new enrollments could break into negative double-digits).
  
  
• Deutsche Bank is looking for EPS of $1.16, new enrollments of 50.4K, and revs of $1.12 billion. Reasoning for recent underperformance include: "weak enrollment trends and 3Q outlook, the impending release of gainful employment (GE) data, as well as ongoing noise in Washington DC around 90/10, military aid, student loan interest rates." Deutsche is also maintaining a cautious outlook given macro trends, weak enrollment, and political volatility heading into November elections.
  Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Apollo Group's past performance at Streetinsider's Apollo Group's Income Statement.

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